That’s a Wrap for One Crisis Away—But Our Emergency Savings Work is Just Beginning
Last week, Prosperity Now was proud to partner with Prudential Financial to bring together emergency savings experts on Capitol Hill and discuss the lack of emergency savings for working families at One Crisis Away: Helping Low-Income Workers Save for Emergencies. Congressman Jimmy Gomez (CA-34) and a robust panel addressed this critical issue to a full room of Hill staffers, researchers and advocates.
Kicking off the conversation, Prosperity Now’s CEO & President Gary Cunningham introduced the problem of a lack of emergency savings in working families across the country. Forty percent of Americans live in liquid asset poverty, meaning that they do not have adequate assets to cover three months’ worth of basic expenses if they lose their income. Gary shared some of Prosperity Now’s soon-to-be-released research findings around consumer interest in comprehensive savings solutions: “Working families are looking for flexible solutions that are responsible and responsive to their financial lives.” Helping low-income workers save for emergencies means that easy and simple tools that work to grow both short- and long-term savings must be available for all.
In turn, Congressman Gomez spoke about how personal the issue of savings is to him and his family and discussed the complexities of what needs to change to solve this problem for all working families. “Equity means helping people who have the least, the most,” he stated, “it’s unfair when people who need savings and services most can’t access the tools and products designed to help.”
The panel, moderated by Prosperity Now’s David Newville, then took a deep dive into the issues around emergency savings and solutions, with the discussion focusing on what the research shows about the need for emergency savings to what employers can do now to federal policy solutions currently on the table. Joanna Smith-Ramani, Managing Director of the Aspen Institute Financial Security Program, offered insight into the difficult situation that so many Americans face and what research has discovered. “Our work on financial security has uncovered three main challenges: one is that basic expenses are really unmanageable; two is that Americans are struggling with debt; and three, income is not stable for working families.” Smith-Ramani emphasized the need for more creativity in how working families save money.
Harry Dalessio, Head of Institutional Retirement Plan Services at Prudential Financial, highlighted Prudential’s emergency savings feature currently being piloted. This feature would allow working families to save for emergencies without dipping into their long-term savings accounts, such as retirement accounts. Designed with help from Prosperity Now, the vehicle allows for payroll deductions to contribute specifically to emergency savings after tax. With savings set aside for emergencies, working families are less vulnerable to financial misfortunes. This added security is crucial in a time when a Prudential study shows that 25% of Americans spend at least 100% of their paycheck on a monthly basis, and 63% do not have sufficient savings to cover an emergency of $500. As a result of Prudential’s work, Harry reports, “135,000 people have access to an emergency savings vehicle that they did not 12 months ago.”
Backing up the facts behind Prudential’s savings plan, David John, Senior Strategic Policy Advisor at AARP, discussed research data around the behavioral economics involved in helping people save. According to David, working families want ease of access, the ability to start and stop contributing to their plan, and privacy when saving. Such plans are popular with those who want more peace of mind, regardless of income level. “We have virtually the same number of high-income and low-income people who are interested [in emergency savings accounts],” said David.
Shai Akabas, Director of Economic Policy from the Bipartisan Policy Center, presented additional savings innovations and policy proposals, including gamified savings accounts that mimic the state lottery. Shai expressed hope that some of these creative approaches to saving would be supported by lawmakers by 2021, if not 2020. He also stressed the need for action soon, because “the research shows that once people start touching their retirement accounts, there’s no stopping the leak.”
Bipartisan proposals such as the Refund to Rainy Day Savings Act and the Strengthening Financial Security Through Short Term Savings Accounts Act help working families find new opportunities to save. By using key moments in the lives of working families, at tax time and in the workplace, these bills offer thoughtful, practical solutions to protect working families from the inevitable financial emergencies that come their way.
Access to emergency savings is a serious and growing problem for working families in the United States. But when we unite with bright minds across the fields of policy and personal finance, we can create solutions to give everyone in our country a clear path to financial stability, wealth and prosperity.
For photos and materials from One Crisis Away, check out our event page here. To learn more about the need for holistic savings solutions and how existing savings products and programs meet savings needs, read our five-part series Analyzing the Landscape of Saving Solutions for Low-Income Families. Finally, look out for our upcoming qualitative research report detailing what households are looking for in holistic savings solutions and what this means for designing more responsive financial solutions.