Source: Bank of America
By Shane Weston
September 6th, 2021
An emergency savings fund is a critical aspect to personal finance. Which begs the question, why do so many Americans avoid such a pivotal fund in their savings? The inability to save money is the driving force to failure. An emergency savings fund is "a stash of money set aside to cover the financial surprises life throws your way.” A rule of thumb for an ESA is to have at least three to six months’ worth of living expenses in order to cover unexpected expenses. According to bankrate.com, only a quarter of Americans (25%) are able to say they have the correct amount reserved in their emergency fund.
In addition to this problem, the pandemic was not kind towards saving money. Americans were found to have significantly less money in their savings after the outbreak. In certain circumstances, individuals and households had to reach into their retirement savings to help support themselves. Covid-19 is a great example of how unexpected events can create an impact on your financial life.
As more companies become more aware of this present issue, they are helping to take action with their employees to help save. In the past, companies have supported their employees with saving plans such as a 401(k), 403(b), and HSAs. These plans and others have helped their workers save for retirement, health expense savings, college, etc. Recently, we have seen company studies from Fidelity, SoFi, and Willis Towers Watson proving that emergency savings have become the most sought-after benefit program. This employee sponsored program will try to help individuals reach their goal of being able to handle the unexpected and navigate through financial hardships.
The graph above shows the financial benefits can impact employee's lives. It states that 83% claim that these benefits improve their feelings about being financially secure. In fact, a study stated that 90% of employees would use an emergency savings fund if their employer were to offer it. An employee who is financially secure is more likely to feel better emotionally especially involving stress. A company will not only use this to help employees, but to foster higher productivity during work.
As we move forward, it will be vital to place more emphasis on the importance to save in response to this growing problem. No matter the amount, being able to contribute to a fund for this designed purpose will be beneficial. The overall goal is to build a great financial foundation in order to achieve short term and long-term goals.