Helping Employees Build Emergency Savings
Employees may not realize the importance of an emergency savings fund until they experience a sudden financial crisis such as unexpected medical bills, house or car repairs, or job loss. Having emergency savings is crucial for the financial wellbeing of your employees and their families.
By helping your employees to build emergency savings, you are not only helping them achieve financial security, but you are also helping them maintain their physical and mental health.
Emergencies are Inevitable
Each of your employees has regular monthly obligations that have to be paid on time. These expenses include things such as:
- Car payments
- Utility bills
- Travel expenses
- Heath/home insurance
Employees with high monthly expenses — credit card debt, insurance, living expenses and other financial obligations — may be living from paycheck to paycheck, and may not have an emergency fund. If this person suffered a crisis, such as sudden medical expenses, this could be catastrophic, which is why setting up an emergency savings account is important.
No matter how tough it may be to set up an emergency fund, it’s important to do. An emergency fund can carry an individual or a family through difficult times when their income is too low to pay all the necessary expenses.
Without a financial safety net for unexpected expenses, people could lose their homes, skip necessary medical care, or turn to a loan shark out of desperation.
Signs of Financial Crisis in the Workplace
Once you know what to look for, it’s quite easy to spot employees who are burdened with financial worries. When they are suffering from financial stress, it affects many aspects of their work life, including:
- Reducing productivity
- Negatively impacting engagement
- Affecting their ability to concentrate
- Increasing tardiness and absenteeism
- Causing irritability and tension
Your organization can help to ease financial stress in the workplace by offering your employees financial education, so they can learn how to build an emergency fund.
Emergency Savings Fund Defined
An emergency fund is an amount of money which has been put aside for life’s unexpected challenges. This can include anything from a car accident to emergency dental surgery. The reason for starting an emergency fund is obvious — an individual just never knows what might be around the corner. It is there to help people get through financial crises without them being caught off guard.
Getting to Understand Your Employees’ Financial Status
To help your employees learn about setting up an emergency savings fund, you first need to get to know and understand their financial situations. You can do this in several ways, including:
- Maintain an open-door policy: It’s important to make this a priority so that employees feel that they can turn to you in times of need. Being accessible to your employees not only helps them feel that you care about them, but it also helps to build employee loyalty to the company. When you maintain an open-door policy, you will soon find you have a better understanding of what’s going on with your team.
- Recognize achievement: While you may think this has little to do with getting to understand your employees’ financial situation, you would be mistaken. Recognizing and rewarding their achievements is all part of building trust between you and your team. If they trust you, then they will feel comfortable enough to come to you with their financial concerns.
- Spend time together outside of work: This is an excellent way to get to know not just your employees, but also their families. But don’t confine this time outside of work to be specifically company-related, such as a company picnic or company outing. Do something that can build relationships with you and your employees that is not work-related, such as volunteering within the community or forming a sports team.
- Make employees a priority: One of the best ways to get to know your members of staff better is to make them a priority. Take the time to invest in stronger and more personal relationships with your employees so that you can develop a healthier dynamic.
How to Start an Emergency Savings Fund
Now you have gotten to understand your employees’ financial status, you can begin to help them learn how to build an emergency savings fund. This will not happen overnight, and how each employee begins their fund will largely depend on how much money they have coming in and going out each month.
For example, an employee who is in debt could save a starter emergency fund of $1,000. Once their debt has been paid off, they will have some spare money to add to their emergency safety net to an amount that could fund three to six months of expenses should they have an emergency, such as loss of employment or a health crisis. Savings will not only help with unexpected emergencies, but they can also help with retirement and future planning.
Ways You Can Encourage Your Employees to Save
Here are some tips to encourage your members of staff to begin saving for an emergency fund:
- Act now. Often employees don’t think about retirement or emergencies other than as something that is in their distant future. By getting them to talk about these financial issues, you can encourage them to act now to start reaching their savings goal before it’s too late.
- Automate the process. Make it easy for employees to save by helping them set up automatic deposits so that they don’t even have to think about it; it’s done for them. Employees can opt into a savings plan and then have a certain amount deducted from their paychecks each month and transferred to a savings account.
- Focus on reasonable goals. Make sure employees start their savings plan slowly with small goals. Otherwise, they will be struggling to meet their savings amount and will be more inclined to ditch the plan altogether. It may seem easier for them to save $5 per day than to think about saving $150 each month, although the outcome is the same.
- Educate your employees. By hiring a financial counselor to host a seminar for your employees, you can effectively empower them with skills on money management, saving, and keeping track of spending. Investing this money in your employees now can save you cash down the line because you are helping them maintain their financial wellbeing. Once their financial stressors are out of the way, they can focus on retirement plans.
More Employers Invest in Employees’ Financial Lives
It’s becoming a growing trend for employers to help their members of staff set up ways to set up emergency savings programs in an attempt to deflect money problems and prepare employees for retirement. Companies such as Kroger, Sun Trust Bank, and Levi Strauss are some of the leaders in this movement.
Since investing in eliminating their employees’ financial stress, these companies are noticing positive results, such as increased employee participation in the savings program and improved financial wellness overall— providing this type of financial education is an investment toward the wellbeing of your employees and company.
If you are not already helping to improve your employees’ financial wellness, it’s time to start. Don’t let your team members fall into a debt cycle. Help them through financial distress by encouraging them to build savings fund and offering them employee loans if they have an emergency.