How to help employers create financial safety nets for employees

Last year was plagued by constant market volatility, leaving many consumers unsure about how to navigate their investment strategies to withstand highs and lows. This economic turbulence evolved against the backdrop of a continued tightness in many labor markets, amplified by an ongoing cadence of layoffs at juggernauts like Microsoft, Google and Amazon. 

Broader economic uncertainty can cause significant anxiety around financial security. More than half of employees (54%) in a survey recently conducted by Betterment at Work said this anxiety makes it difficult for them to focus at work. While advisers can't necessarily absolve employees of stress, they do have the opportunity to encourage employers to give their teams the tools they need to help alleviate financial anxiety and improve their mental health, both at work and in their everyday lives. 

One way employers can help combat employee anxiety is by encouraging employees to maintain emergency savings funds, or cash reserves specifically set aside for unplanned expenses or financial emergencies. Despite the empowerment that comes from having money saved to handle unexpected crises, many employees don't have any sort of emergency savings fund, or the support from employers to start one. Our survey found only 59% of employees currently have an emergency fund, leaving them without any sort of financial safety net to fall back on when they need it most. 

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Without emergency savings, employees can be forced to dip into funds earmarked for retirement to cover expenses. Our survey found over a quarter (28%) of people tapped into retirement savings to pay for short-term expenses this year, from paying rent or bills to car repairs. Having an emergency savings fund can provide peace of mind and circumvents the need to tap into these funds before retirement. 

To help their employees, employers can offer guidelines on how to start an emergency savings fund with even a small amount of cash. Our survey found one of the biggest barriers to employees starting an emergency fund is not believing they have the funds to build one. 

Employers can play a valuable educational role here, reinforcing that even putting small amounts of cash into a savings fund over time can help, and encouraging employees to increase the amount they stow away gradually over time. Recognizing it can be awkward to broach this subject with employees, employers also can look to their benefits providers and advisers who may offer educational programming and can come talk to employees about how to get started with an emergency fund. By emphasizing starting small, employers can remove intimidation and help employees save money on their own financial terms. 

In addition to having a speaker or educational programs, employers can offer access to a financial adviser who can assist with kickstarting employees' emergency savings funds. Our survey also found some employees don't have an emergency savings fund because they just don't know how to start one. Financial advisers can work directly with employees and walk them through the process, from choosing a savings account to building up those savings over time based on individualized goals.

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Another solution is to consider offering employees the option to participate in an employer-sponsored emergency savings account (ESA), which also can help employers re-align benefits packages with employee expectations. The results of our survey showed an employer-sponsored emergency savings fund is the third-most sought after benefit that would convince an employee to leave their job for another employer, after a 401(k) plan and an employer match. However, only 8% of employers currently offer these sponsored savings funds, leaving a space your client can fill to meet employee needs at a relatively low cost to the company. Most employers likely don't realize that it can be simple to include an ESA alongside their traditional benefits programs, and it's worthwhile exploring with their financial benefits providers.

Educating employees and helping them build emergency savings funds not only increases their preparedness for unexpected circumstances, but again, is designed to positively impact their overall financial wellbeing. Over two-thirds of the employees we surveyed (71%) say their finances cause them anxiety.  By helping employees build emergency savings funds, employers can not only help them feel more confident in navigating their biggest financial stressors, but also improve their overall productivity and happiness in the workplace. 

Employers can stand out from the pack by offering support in building emergency-savings funds, whether it's through educating employees on how to get a fund started, by offering an ESA, or removing intimidation around what's needed to start saving today.  Overall, it's important to remember during volatile times, the employee populations you serve are likely focused more than ever on planning for the future and protecting themselves – and can use your help in doing so effectively.