Employers often match 401(k) contributions. Could they also start matching emergency savings?

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It’s a possibility for sure.


Key points

  • It is important to have money in the bank in case of an emergency.
  • Employers could start helping workers save for contingencies in the same way they help them save for retirement.

If you’re a salaried employee, you may be eligible for a host of benefits, like subsidized health insurance, paid vacation and sick leave, and a 401(k) plan with employer matching. . Many companies that sponsor a 401(k) plan for retirement savings also match worker contributions to some degree.

This is a very good thing, because it helps workers accumulate savings that they can access in retirement, when they might need them to pay for their basic expenses. The problem, however, is that many workers lack emergency savings, and a large part of the reason comes down to the fact that they don’t get any help building them up.

But some lawmakers are pushing to change that. And if they get their way, employers could soon start matching contributions for emergency savings the same way they do for retirement savings.

An important need to be filled

Life has a way of throwing costly surprises people’s way. And that’s why everyone needs money in a savings account to cover unexpected bills.

Financial guru Suze Orman says it’s a good idea to save enough money to cover eight to 12 months of living expenses. Unfortunately, this is an unattainable sum for many people. But even saving enough to cover three months of expenses is a great way to ensure good financial protection.

Without the help of an employer, however, some people may struggle to reach this target. That’s why lawmakers recently introduced the Emergency Savings Act of 2022. Its goal is to make workplace savings accounts as accessible to workers as 401(k)s and encourage employers to help workers build the cash reserves they need.

Orman is a big supporter of this bill. As co-founder of SecureSave, a fintech company that helps companies create workplace savings accounts for employees, Orman thinks it’s important to remove barriers to building emergency cash reserves. And one way is to make it just as easy to save for the short term as it is to save for a distant milestone like retirement.

Will companies start to mobilize?

Currently, very few companies have programs in place to help workers save for emergencies. But that could soon change.

There has been a strong push for employer-level assistance with emergency savings, and as this movement gains traction, we may see more companies begin to incorporate this benefit into their benefit plans. remuneration. Of course, that doesn’t mean that by this time next year most companies will help workers build their emergency fund. But we can see a higher percentage than the number of companies doing it today.

Until then, however, workers should do what they can to build up their own savings. This could mean having tight budgets, working in parallel and reducing all non-essential bills. Without emergency savings, a single unforeseen expense could lead to a pile of costly debt. And it’s a source of stress that no one should have to deal with.

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