Support from employers could make a huge difference when it comes to building savings.
- Many Americans are ill-equipped to handle an emergency expense.
- A new bill, the Emergency Savings Act 2022, aims to give employers a bigger role in helping employees save.
You never know when an unexpected expense or financial emergency might arise. It can be something as minor as a small car repair or as serious as a medical issue that keeps you from working for months.
This is why it is so important to have personal cash reserves. In fact, ideally you should have enough money in your savings account to cover at least three months of bills and ideally up to a year of expenses.
But many Americans are desperately short of emergency funds. The Federal Reserve reports that in 2019, 37% of Americans could not cover a $400 emergency expense using money from their savings. And in a more recent survey by Branch, 48% of hourly workers saved $0 for emergencies.
Part of the problem stems from the fact that workers don’t have an easy way to transparently hand over money for emergency savings. Many employers offer 401(k) plans that make it easy for workers to save money for retirement. But the number of companies offering workers emergency savings accounts is negligible.
A new bill seeks to change that. The Emergency Savings Act of 2022 aims to make workplace emergency savings accounts available to employees, much like 401(k)s are. And it could be just what workers need to jump-start their savings efforts and get the financial protection they need.
It’s time to change
Many people get used to having money taken from their paycheck for retirement savings, and that alone helps them stay on track. But that option largely doesn’t exist when it comes to workplace emergency savings accounts, even though companies like SecureSave allow employers to set up and contribute to these accounts on behalf of employees. workers.
Instead, workers often need to fund their emergency savings when circumstances permit. But in recent months it has been a tall order, with inflation driving up the cost of living across the board.
Unfortunately, millions of Americans are now in a vulnerable situation due to a lack of emergency savings. That’s why it’s crucial to make the process easier for them and to make it easier for employers to support workers’ emergency savings goals.
It’s also why it’s worth signing this petition calling on lawmakers to remove barriers to building savings. Passing the Emergency Savings Act of 2022 could open the door to savings opportunities for those desperate for rainy day funds.
A way to avoid severe penalties and debts
Workers who lack emergency savings often resort to expensive debt when they need cash on the fly. But getting into debt means paying interest and, in some cases, risking damage to your credit rating.
Likewise, taking an early withdrawal from the pension plan is far from ideal when it comes to scrounging up emergency cash. Tapping an IRA or 401(k) plan before age 59½ usually means facing an early withdrawal penalty, paying taxes on the money withdrawn, and running out of retirement funds down the line. .
Making emergency savings accounts more accessible to the public could spare so many people the consequences of getting into debt or withdrawing early from a pension plan. And so, if you agree that emergency savings accounts are a social benefit that everyone should be entitled to, please make your voice heard by signing the aforementioned petition.
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