BlackRock's savings plan helps workers navigate financial crisis

Over the past four years, powered by philanthropic capital, BlackRock's Emergency Savings Initiative (ESI) has been piloting and scaling emergency savings solutions offered to U.S. workers earning low and moderate incomes. During this time — which has overlapped with the fall-out of the COVID-19 pandemic — it's become clear that employers are a key to fostering financial security for workers, and that there are many opportunities for employers to create an impact through employer, payroll and retirement recordkeeper solutions.

BlackRock's Emergency Savings Initiative recently released an Impact & Learning Report, which highlights the results of these efforts since its launch in 2019: ESI has reached more than 10 million working Americans with high-quality emergency savings provisions and helped generate more than $2 billion in new liquid savings — much of it while adapting to a new financial reality brought on by the pandemic.

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A financial crisis strains workers earning low and moderate incomes
When BlackRock's Emergency Savings Initiative was launched, a growing financial crisis was spreading throughout the U.S. and abroad: People earning low to moderate or volatile incomes with little or no access to short-term savings were far more likely to miss housing payments, fall short on medical bills, and compound expensive debt. They were also less likely to save for retirement. With 37% of Americans unable to manage a $400 emergency with savings, the issue of emergency savings is an urgent one for much of America. 

BlackRock committed to responding to this problem and recruited nonprofit consumer financial health experts Commonwealth, Common Cents Lab and Financial Health Network to help drive market-based innovation. We envisioned a world where employers, financial services, and public policy actively support Americans to build a critical savings safety net. 

Shortly after our 2019 launch, the pandemic shut down critical sectors of the economy, leading to widespread layoffs and a financial crisis for millions of families, especially those living on constrained incomes. Key decision makers, including policymakers and large employers, began openly recognizing the importance of short-term savings for financial stability. It was a watershed moment: Building emergency savings opportunities and tools into the fabric of an organization was no longer a question of if, but how.

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Learnings arm employers and the benefits industry with new emergency savings tools
In 2023, when employers and workers are again facing a number of financial challenges, the research and programs that BlackRock's Emergency Savings Initiative has piloted provide actionable steps that employers can take to help prepare workers to weather financial uncertainty. We now have a host of evidence that shows that creating tools and opportunities for workers to save not only enhances employee financial well-being, but also enables business success.  

To make emergency savings tools easy to use, we must embed them in the systems that already serve tens of millions of people — retirement plans, workplace benefits, payroll cards — and in the events that shape people's financial lives week in and week out.

There are a number of actions that companies have already taken to improve emergency savings solutions for workers — particularly those earning low and moderate incomes.

In particular, payroll companies and retirement recordkeepers hold tremendous potential as emergency savings providers because they are already integrated into employees' financial lives. Throughout the last four years, we've built pilot programs with recordkeepers such as Voya and payroll providers such as ADP that have resulted in over $2 billion in new employee emergency savings. Employers can demand these savings features from their providers — and they can work across departments, from payroll to benefits to the C-suite, to ensure that available emergency savings options are successfully communicated to employees — especially lower wage workers, and workers of color.

Defaulting people into emergency savings tools is effective and often popular; automatic enrollment is a powerful, proven approach to support people in realizing their own savings aspirations. In December, Congress passed historic SECURE 2.0 legislation, which had a number of emergency savings provisions tied to retirement. Beginning next year employers will have the option to automatically enroll employees in emergency savings accounts embedded in their 401(k), and employees will have new ways to respond to unexpected expenses without penalty. With these provisions there are new opportunities for employers to enable financial security among workers — and to embrace their central role in building financial well-being outside of delivering a paycheck. 

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Work should continue to address the needs of workers living on low and moderate incomes
While these new policies allow employers to auto-enroll workers into an emergency savings option, there are no auto-enrollment options for employees who don't have access to, or are not participating in, retirement plans — about half of all workers. In fact, only 68% of the workforce has access to employer-sponsored retirement plans. Women comprise a majority of the workers who are not eligible for or covered by an employer-sponsored plan, and a Voya study indicates that Black and Latinx workers participate in employer-sponsored plans at lower rates. These results indicate the need to address emergency savings outside of retirement plans in order to close the racial and gender wealth gaps. Effective policy for workers without access to retirement plans will be vital to build the financial security of low and moderate-income workers.

The past four years have been a powerful starting point for our vision to make low-cost, accessible, and easy-to-use emergency savings the norm for every worker in America. And we are building on that vision by cultivating cross-sector leadership on the issue through a mixture of private, public and social sector action. As momentum for uptake and inclusive design for emergency savings accounts continues among employers and industry players, a conversation about emergency savings as a core financial wellness benefit is key to making high-quality emergency savings accounts a gold standard in the workplace benefits landscape, and to encourage policymakers to expand access to emergency savings tools.

We will continue to work towards a future where it is possible for every person living in the U.S. to have the opportunity to build a savings cushion and, ultimately, build savings for long-term financial security and dignity in retirement.