HomeBlackRock’s Emergency Savings Initiative: Helping More Americans Save
Recognizing that millions of Americans lack short-term savings, BlackRock set out to discover how to help more families build a financial safety net.
By Financial Health Network
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*This story is sponsored by The BlackRock Foundation. All views, language, and endorsements expressed in this are solely those of The BlackRock Foundation and do not necessarily reflect the views or endorsements of the Financial Health Network.
Americans Need Better Ways To Build Savings
BlackRock, a leading provider of investment, advisory, and risk management solutions, believes that everyone should have access to a secure financial future. While short-term savings are foundational to financial stability, 2018 data from the Federal Reserve showed that 39% of Americans didn’t have $400 in liquid savings – a clear sign to BlackRock that it was time to act.
In 2019, BlackRock committed $50 million to driving systems-level change and achieving tangible impact at scale through its Emergency Savings Initiative (ESI). The mission? To help those living on low to moderate incomes gain access to and increase usage of savings tools, ultimately building their emergency savings and supporting their financial health. The cross-sector program also aimed to show that emergency savings tools can be provided at scale through a variety of channels, galvanizing efforts across industries to connect more people with savings opportunities.
BlackRock partnered with the Common Cents Lab, Commonwealth, and Financial Health Network, to bring financial health expertise and support to the initiative. Together, BlackRock and its ESI partners worked with dozens of other organizations to research, test, and scale innovations that would help grow people’s short-term savings.
Creating Momentum for Emergency Savings in America
$2+ billion
saved through ESI savings interventions
43
ESI active savings projects between 2019-2022
10+ million
million people reached with a savings solution through ESI*
*Reach is defined as an estimate of the number of people eligible for and with access to a savings solution under an ESI project through December 14, 2022.
ESI collaborated with 43 partners, including ADP, Levi Strauss & Co.’s Red Tab Foundation, Best Buy, Mastercard, and Voya, to test novel approaches to emergency savings. Through experimentation and innovation, the initiative demonstrated that a diverse range of organizations can offer emergency savings solutions and provide powerful insights into what works. It also uncovered product features and communication strategies to increase savings, establishing a roadmap for others to follow.
ESI reached millions more workers through one-to-many partnerships
To maximize the reach of the initiative, ESI focused on solutions for workers. ESI partnered with employers, recordkeepers, and payroll providers to develop solutions for millions of workers who were earning lower incomes. Together, they established infrastructure and practices that could be easily recreated and scaled by employers and others who need readily available savings solutions. ESI also worked with large financial institutions and fintechs that were able to meet the emergency savings needs of more people – in particular, people who may not be eligible for traditional workplace benefits.
Through this approach, the program created a network effect that now provides employers and workers with greater access to high-quality emergency savings solutions. This work has created a groundswell of activity around emergency savings, spurred policy action, and made a difference in the financial lives of millions.
Levi Strauss & Co.
27%
increase in enrollment in the Red Tab Savers program
1,249
employees participated
$203,000
saved by employees
Levi Strauss & Co.’s Red Tab Foundation (RTF) partnered with ESI and the Financial Health Network to streamline its Red Tab Savers program. By simplifying the signup and enrollment process, it was easier for eligible Levi Strauss & Co. employees to access and succeed with the savings program. In fact, RTF enrollment increased to 14% of Levi Strauss & Co.’s workforce. RTF attributed this success to pent-up demand for the program, which had been paused for a year; competition-based enrollment drives; and word-of-mouth referrals among employees.
RTF’s results demonstrate that making an existing savings program simpler and more accessible can drive employee adoption, and employee feedback and engagement is important for program success.
UPS and Voya
39%
increase in the number of participants in the first year
4,209
employees participated
~$15M
in new savings
UPS, Commonwealth, and Voya collaborated to leverage an existing feature of the UPS 401(k) plan, encouraging its nearly 100,000 nonunion employees to save for the unexpected. The working group chose the after-tax option of UPS’ Voya-administered 401(k) plan as the high-quality emergency savings solution. Through a multi-channel engagement and communications campaign, the project increased awareness of and participation in the emergency savings program by UPS employees, including employees earning LMI who benefit most from increased emergency savings.
Commonwealth’s collaboration with UPS and Voya to offer an emergency savings solution to UPS’ non-union employees demonstrates an opportunity for other recordkeepers and plan sponsors to improve worker financial security through an existing feature of many retirement plans.
ESI showed that emergency savings can protect long-term savings
ESI and its partners learned that increasing emergency savings doesn’t cannibalize retirement contributions. Instead, it prevents early withdrawals from retirement savings and can even increase contributions to retirement.
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- Emergency savings act as an important buffer against early withdrawals from retirement: Research conducted with the Defined Contribution Institutional Investment Association Retirement Research Center (DCIIA RRC) during the pandemic showed that low-income households with at least $2,000 in emergency savings were half as likely to withdraw from their workplace retirement savings account. Other research from DCIIA RRC showed that workers with significant emergency savings are half as likely to withdraw from their retirement savings, improving their short- and long-term financial security. Research from Voya, an ESI partner, found that those with inadequate emergency funds are 13 times more likely to take a hardship withdrawal than those with adequate savings.
- Offering emergency savings paired with a retirement account could encourage more retirement contributions: ESI and DCIIA RRC research found that people with emergency savings were 70% more likely to contribute to their retirement plan. Another study from Commonwealth and SaverLife showed that almost a third of individuals would be more likely to start contributing or contribute more to a retirement account if it was paired with an emergency savings account. This finding was supported by ESI’s partnership with UPS, where introducing an emergency savings option positively impacted some people’s retirement savings. UPS employees who increased their after-tax contribution rate were about twice as likely to also have increased their pre-tax contribution rate than employees who didn’t change their contributions.
- Auto-enrollment doesn’t hurt retirement savings participation and dramatically improves emergency savings rates: ESI partner Nest conducted an auto-enrollment pilot in the United Kingdom, which showed there was no evidence that people opted out of their pension at higher rates when offered payroll autosave compared with having to opt in. It also found that only 1.3% of those who opted in participated in payroll saving versus 52.6% of the auto-save group.
- Offering in-plan after-tax options as well as out-of-plan options will ensure emergency savings access reaches more employees: Existing workplace benefit providers are one of the most effective channels for reaching people at scale. However, 58% of the bottom quarter of earners don’t have access to retirement plans. This means that many employees, especially workers earning low incomes, need emergency savings options that are separate from a retirement plan.
ESI sparked awareness and action among business, media, and policy leaders
ESI’s reach extended far beyond the 43 partners who participated in the program. The initiative jump-started a national conversation around emergency savings, inspiring many enterprise employers to announce their own emergency savings programs in the two years after ESI launched. For example, Starbucks introduced its My Starbucks Savings program to help employees save for the unexpected and emergencies. Employees can open an account, set up payroll contributions, and earn up to $250 in incentives for reaching key milestones.
By providing evidence of the positive relationship between short-term and long-term savings, the ESI also encouraged policymakers to include provisions for emergency savings in retirement security legislation. For example, new provisions were added to the SECURE 2.0 federal legislation, which enables workplace-based emergency savings.
Other policy milestones include:
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- Spurring legislation to expand access to emergency savings opportunities for workers with a 401(K) plan
- Influencing regulatory approval of employer-issued autosave solutions
- Drawing attention to the need for policies that support emergency savings solutions
ESI drove positive change for Americans living on low to moderate incomes
Emergency savings are fundamental to financial health. For someone facing a surprise medical bill or car repair, a liquid savings cushion can make the difference between minor inconvenience and major shock – especially for Americans living on low to moderate incomes.
When analyzing data from the initiative to see what worked, ESI observed three elements that effectively encouraged short-term savings for millions.
Make savings opt-out
Interventions that were opt-out, perceived opt-out, or required savings saw a median uptake rate that was 4 times higher than interventions where people had to proactively take action to start saving. Based on this compelling evidence, pursue auto-enrollment for short-term savings programs through employers, recordkeepers, and financial institutions.
Prompt for savings in product
Interventions that changed an in-product sign-up flow to encourage savings, such as reordering onboarding screens or adding a savings questionnaire, saw increased median uptake rates (39%) compared with interventions that relied solely on email campaigns to nudge savings behavior (7%).
Target new users
Interventions that targeted new employees or members had greater median uptake rates (39%) than those that targeted existing employees or members (8%). This is probably because new users are less habituated; are at a prime moment for starting a new behavior; and are more easily presented with an opt-out, perceived opt-out, or required savings prompt through employee onboarding or new product or account openings.
“I see [my financial future] getting better and I see five years looking a lot better. I’m very optimistic about it. I’m more aware of spending and saving now.”
Participant in BlackRock’s Emergency Savings Initiative
Start Your Emergency Savings Journey Today
The work of the ESI continues, if you are interested in learning more about this initiative or implementing an emergency savings solution with your clients or employees check out our savingsproject.org.
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