Saving money has been top of mind with most Americans since the pandemic brought unprecedented and unwelcome levels of uncertainty to everyday activities. People are putting these thoughts into action, saving at higher rates than any time in recent memory. In fact, CNN reported1 the domestic savings rate rose more than 5% from February to March of this year, to 13.1% — the highest savings rate in nearly four decades.
But what about those who don’t have the resources or tools to enable regular savings behaviors?
“The lack of ability to save a portion of income each month contributes significantly to financial insecurity,” said Andy Garner, Netspend Vice President of Sales and Business Development.
“Before the pandemic, even among those with steady employment, our research shows that 43% of workers didn’t have any money left after covering basic expenses each month, and 55% couldn’t pay for an unexpected $400 expense without going into debt, let alone have enough funds leftover each month to save for retirement.2”
This lack of ability to save detracts from financial health in two key ways:
- It limits the financial cushion people have to manage unexpected short-term needs, which can drive them into high-cost debt.
- It completely stymies the power to build long-term wealth.
There are three key ways that employers can help their workforce build a savings habit and ultimately a nest egg that is essential to financial health:
While saving is a challenge for many, that doesn’t mean it isn’t a priority for younger adults, in particular. Research Netspend conducted before the start of the pandemic uncovered only about a third (34%) of Gen Z was saving a portion of their monthly income for retirement3, making them the least likely to be saving among all generations. But this generation wants to start saving — 46% of Gen Z plans on saving more of what they earn in the next five years, versus only 42% of Millennials.4Regardless of age, 64% of the workforce is interested in getting tools from their employers that support the ability to save, including savings programs, discounted or free financial services and multiple payroll methods.5
- Help people get a clear picture. While the lack of leftover funds each month is a significant barrier to building savings, this naturally depends on overall spending. Making it easy for people to consistently track spending is a key first step.
- Give access to savings tools. The willingness and desire to save must be supported by the ability to actually separate funds from day-to-day spending money in a practical manner, and ideally in a way that allows those funds to grow. But many financially insecure individuals may be managing their finances primarily with cash, and do not have access to common savings mechanisms.
These individuals do not have any practical, sustainable or secure way to separate funds, and some may not meet the minimum balance requirements for traditional bank savings accounts.
But there are tools available to fill this gap and also provide other features that support saving habits such as budgeting, and features that automatically pull funds from each paycheck into a savings account.
- Help your workforce start small, to build good habits. Giving access to tools that are convenient and realistic is key to helping people build good savings habits.
There are many programs linked to paycards or other payment accounts that enable consumers to round up their spending into a savings account, or to automatically push a specified amount to savings each pay period. Starting small is one of the best ways to ensure that saving money will indeed become a sustainable, long-term habit.
This is a key reason why Netspend recently added an optional savings account to its Skylight® ONE® Prepaid Card, which offers your employees the ability to earn up to 5.00% Annual Percentage Yield (APY)6, with no minimum balance required to open a savings account.
1 CNN, May 2020, “New threat to the economy: Americans are saving like it’s the 1980s”
https://www.cnn.com/2020/05/12/investing/jobs-coronavirus-consumer-spending-debt/index.html
2 The Impact of Employee Financial Health on Business and the Economy, page 3
3 The Impact of Employee Financial Health on Business and the Economy, page 4
4 Forbes, April 2020, “Covid Impact: Gen Z versus Millennials” https://www.forbes.com/sites/forbesinsights/2020/04/16/covid-impact-genz-versus-millennials/ https://www.forbes.com/sites/forbesinsights/2020/04/16/covid-impact-genz-versus-millennials/#6f0022cf5b5d
5 The Impact of Employee Financial Health on Business and the Economy, page 5
6 The Savings Account is made available to Cardholders through Republic Bank & Trust Company; Member FDIC. To open a Savings Account, Cardholder must consent to and continue receiving
communications from us in electronic form, must not be subject to IRS back-up withholding at the time of enrollment, and must not be a resident of Michigan. Interest is calculated on the Average Daily Balance(s) of the Savings Account and is paid quarterly.
- If the Average Daily Balance is $1,000.00 or less, the interest rate paid on the entire balance will be 4.91% with an annual percentage yield (APY) of 5.00%.
- If the Average Daily Balance is more than $1,000.00, the interest rate paid on the portion of the Average Daily Balance which exceeds $1,000.00 will be 0.49% with an APY of 0.50%, and the interest paid on the portion of the Average Daily Balance which is $1,000.00 or less will be 4.91%. The APY for this tier will range from 5.00% to 0.54%, depending on the balance in the account. The interest rates and APYs of each tier may change. The APYs were accurate as of November 1, 2020 No minimum balance necessary to open Savings Account or obtain the yield(s). Because Savings
Account funds are withdrawn through the Card Account (maximum 6 such transfers per calendar month), Card Account transaction fees could reduce the interest earned on the Savings Account. Card Account and Savings Account funds are FDIC-insured upon verification of Cardholder’s identity. For purposes of FDIC coverage limit, all funds held on deposit by the Cardholder at Republic Bank & Trust Company will be aggregated up to the coverage limit, currently $250,000.00.
The Skylight ONE Visa Prepaid Card is issued by Republic Bank & Trust Company pursuant to a license from Visa U.S.A., Inc., and can be used everywhere Visa debit cards are accepted. The Skylight ONE Prepaid Mastercard is issued by Republic Bank & Trust Company pursuant to a license by Mastercard International Incorporated. Republic Bank & Trust Company, Member FDIC. Netspend is a registered agent of Republic Bank & Trust Company. The Skylight ONE Visa Prepaid Card may be used everywhere Visa debit cards are accepted. The Skylight ONE Prepaid Mastercard may be used everywhere Debit Mastercard is accepted. Certain products and services may be licensed under U.S. Patent Nos. 6,000,608 and 6,189,787. Use of the Card Account is subject to activation, ID verification and funds availability. Transaction fees, terms, and conditions apply to the use and reloading of the Card Account. See the Cardholder Agreement for details.
Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
