One in three Americans (35%) say their money problems got worse from 2020 to 2021.
And 40% of working Americans say they’ve had financial difficulties paying for a personal expense, while a. A third could pay for only one month of bills or less from their savings on hand if their income suddenly stopped. And 21% borrowed from their retirement accounts.
Those are among the findings from a survey we conducted with the Bipartisan Policy Center* and the Funding Our Future Coalition.
What can be done to help those people dealing with financial stress? The answer is remarkably simple – and it comes from the very people we surveyed. Some 42% of them say they want their employers to create an automatic savings account for them.
Why is the automatic aspect so important?
Experts in behavioral economics say people don’t always act in their own best interests when it comes to retirement savings, often due to a lack of self-control. We tend to choose immediate gratification over planning for the future, even if it exasperates our money problems.
The solution is to make emergency savings automatic. We already do this for retirement savings – that’s how a 401(k) works! By having money automatically diverted from a paycheck, you don’t see it – or miss it. With savings already handled, you’re free to spend your take-home pay without guilt.
This is why the employees we surveyed say they want their employers to create an emergency savings plan for them. Employers would simply divert an agreed-upon portion of every paycheck into a bank, money market or similar account. Should an emergency arise, the cash will be available for you!
It’d be easy for an employer to create this program. So ask your employer to consider starting one for your workplace.
But if they won’t, or can’t, you can always set up an automatic savings plan yourself using a round-up savings app.
Automatic savings app
The way these apps – such as Acorns or Chime – work is that whenever you use your debit card to make a purchase, they calculate the difference between the purchase price and the next round dollar and automatically deposit that difference into a separate savings account.
You won’t miss the pennies here and there, but over time those micro-deposits can amount to significant savings, which you can use for emergencies or unexpected costs should they arise.
If your money problems increased over the last year, talk to one of our experienced financial advisors about ways to get back on track and reduce your financial difficulties.
* Bipartisan Policy Center. (February 25, 2021). New BPC Survey Shows Americans Need Better Ways to Save for Emergencies. Retrieved on August 30, 2021, from bipartisanpolicy.org