Suze Orman weighs in on why employers should offer emergency savings benefits

September 10, 2021

The pandemic has taught employers and employees a lesson in preparedness. If there is one key takeaway, it’s that employees need to have both short-term and long-term savings — and they need their employers’ help to achieve both.

Emergency savings benefits are a critical weapon in combating employee stress, lack of productivity and distractions at work, which will ultimately help lower costs for employers. However, as helpful and important as these benefits are, many employees don’t utilize them because they require too much legwork on their end.

That’s why the key to a successful employer-sponsored emergency savings program is automation, according to Devin Miller, CEO of SecureSave, an emergency savings benefits provider, and personal finance expert, TV personality and SecureSave cofounder Suze Orman.

Read More: How to support the financial health of your workforce — beyond benefits

“For the 40 years I've been doing this, the number one thing that I've told everybody is you need an emergency fund,” Orman said during a panel at the 2021 annual Society for Human Resource Management conference. “But, what we have found over all these years is that people just don't do it, and why don't they do it? Because it's not automated.”

When employers are looking into an emergency savings plan, they should consider a program similar to the way 401(k)s are offered. Most employers automatically enroll employees in a 401(k), then leave it up to individuals to select their own contributions — but even if they ignore those choices, the 401(k) will still work for them. Emergency savings benefits, Miller explained, need to work in the same way.

“Employees were shocked into changing their priorities around [emergency savings because of the pandemic],” he said. “But the importance of getting employers involved is that it makes it so easy for employees. Unfortunately people left to their own devices won’t do this.”

Read More: Employees may be losing out on $700K in ‘forgotten’ 401(k)s

There are a lot of steps involved for an employee setting up an emergency savings account on their own, including finding the right plan, opening it up, and configuring everything so they can make their deposits. Miller’s company, SecureSave, works with employers to take all of that burden off employees.

“You can automate this whole thing and really make an impact on people,” Miller said, noting that SecureSave sees a 45% adoption rate into these programs and a 95% retention rate. “Make it brain-dead simple for the employee. It has to be something that they could just click a single button and just get in and get set up and that is what we do. Other programs out there — although their hearts are in the right place — ask the employee to do too much to try and drive these programs.”

Some employers might think that providing a 401(k) is enough of an investment into their employees’ financial security, but while planning for tomorrow is a critical tool, most employees are more concerned about today’s financial hardships.

Read More: Investors focused on retirement savings, but get little help from employers

“When employees have money in a 401(k) or an HSA, that's all money meant for when you retire,” Orman said. “On some level it gives the employee a false sense of security because they think they have all of this money, but when a tragedy or an emergency happens, they shouldn't go to their retirement accounts to pay for their present day needs —the retirement accounts are for future day needs.”

Only 15% of employers offer employees access to emergency funds, according to research from the Society for Human Resource Management. Thirty-five percent offer employees financial planning assistance and 24% offer financial coaching. Ninety percent of employees served by SecureSave say they would use an emergency savings program if it were offered by their employer and 90% say they would participate if their employer had a $50 per year match.

Read More: Employees shouldn’t be blindsided by end of life decisions. How benefits can help ease the burden

“The most important benefit today is the one employers are not offering,” Orman said. “When employees save in their 401(k) they feel really good when the market goes up, but when the market goes down it makes them so insecure, they don’t know what to do. What's so fabulous about [an emergency savings benefit] is it never goes down, unless the employee withdraws it themself. So this one piece gives them more security.”