EBRI Issue Brief

Emergency-Fund-Focused Employers: Goals, Motivations, and Challenges

Feb 13, 2020 18  pages


Data from the Federal Reserve show that among families with working family heads, only 20.1 percent had liquid savings of more than three months of their family income in 2016. This rises slightly to 24.7 percent of families with heads participating in a defined contribution plan. In other words, most workers would likely struggle with unexpected expenses such as car repairs or medical expenses. Clearly, this can have a bottom-line impact on employers: Financially stressed employees may be less productive. Indeed, if an employee cannot afford to repair their car, they may not even be able to make it into their workplace.

As such, it’s little wonder that employers are increasingly concerned about workers’ emergency savings situation. Reported approaches to encouraging employees to save for emergencies range from providing guidance and tools to offering incentives, creating “sidecar” or rainy day accounts, and matching employee emergency savings contributions.

To better understand employer goals, motivations, and challenges when it comes to helping employees with their emergency savings, the Employee Benefit Research Institute (EBRI) examined responses from “emergency-fund-focused employers” or those employers in its 2019 Employer Approaches to Financial Wellbeing Solutions survey that said they offer or plan to offer an emergency fund or employee hardship assistance as a financial wellness initiative.

EBRI found:

  • More than 4 in 10 (43.6 percent) employers that expressed at least some interest in offering financial wellness programs said they offer (28.2 percent) or plan to offer (15.3 percent) an emergency fund/employee hardship assistance as a financial wellness initiative.
  • These emergency-fund-focused employers were significantly more likely to have taken a number of steps to understand their employees’ financial wellness needs than all employer respondents.
  • Emergency-fund-focused employers were most likely to define the term “employee financial wellness” as achieving overall financial security, with 38.9 percent doing so.
    • Yet when measuring the success of financial wellness initiatives, these employers most commonly focused on improved use of existing retirement plans, such as higher contributions to retirement plans and lower loans or withdrawals (39.8 percent).
  • Emergency-fund-focused employers were more likely to rate their company’s level of concern about employees’ financial wellbeing as high (9 or 10 on the 1–10 scale) than all employer respondents: 31.5 percent vs. 22.2 percent.
    • The average rating was 8 for the former and 7 for the latter.
  • When asked what are or would be their top three reasons for offering financial wellness initiatives to employees, emergency-fund-focused employers, surprisingly, didn’t cite reduced employee financial stress as commonly as all employer respondents.
    • Just over a third (36.1 percent) of emergency-fund-focused employers gave this as a top reason compared with 42.3 percent of all employer respondents.
  • Emergency-fund-focused employers were more likely than all employer respondents to favor education-based financial wellbeing or debt assistance benefits to employees over product-based benefits, which might include insurance, retirement plans, or employee assistance programs to fill this role.
  • These employers favored traditional approaches, such as employee relief/compassion funds (44 percent).
    • Sidecar or rainy day accounts were offered by only 8 percent of such respondents.
    • However, there is considerable evidence that many such employers are eyeing more cutting-edge initiatives: Nearly 1 in 5 emergency-fund-focused respondents (19 percent) said they were planning to offer rainy day accounts; another 29 percent expressed some interest in such offerings.
    • Likewise, while just 13 percent said they were offering emergency savings vehicles through payroll deductions, another 19 percent were planning to offer these in the next one to two years, and 29 percent expressed an interest.
  • Emergency-fund-focused employers were less likely to pay for all costs related to financial wellness initiatives than all employer respondents: 40.7 percent and 46.0 percent respectively.
    • The cost per employee of financial wellness initiatives reported by emergency-fund-focused employers tended to be somewhat higher than for all employer respondents, according to the survey results. While 36 percent of emergency-fund-focused employers reported the annual cost per employee for financial wellness initiatives was more than $50 on average, 32.5 percent of all employer respondents reported this.
  • There was a disconnect between some of the reasons given for offering financial wellness initiatives and approaches to measuring their success.
    • Far more emergency-fund-focused employers cited improved overall worker satisfaction as a reason for offering financial wellness initiatives (44.4 percent) than responded that improved overall worker satisfaction would be a measure of the success of the initiative (29.6 percent).
    • Increased employee productivity was more commonly cited as a reason (29.6 percent) than a measure (20.4 percent).