Nearly 40% of Americans don’t have enough money saved to cover an unexpected expense of $400. Lack of emergency savings is an increasingly urgent issue especially for lower-income households, particularly Black, Latinx, and female-led households making less than $60,000 annually per year who are disproportionately affected. Employers, such as UPS, have responded by offering emergency savings and other financial security solutions for their employees.
As more employers offer emergency savings solutions, especially considering how the COVID-19 pandemic shone a light on the financial fragility many American workers face, it’s important that they include a user experience that is accessible for low- and moderate-income (LMI) employees. LMI employees would benefit greatly from having access to emergency savings accounts, as access to such accounts would lessen the financial stress associated with unexpected expenses.
As part of our work with BlackRock’s Emergency Savings Initiative, Commonwealth prototyped a solution to improve engagement and increased likelihood of emergency savings signup. With the need for a quality emergency savings solution designed for LMI workers in mind, Commonwealth designed a simple and engaging signup flow for an employer-offered emergency savings account and sought user feedback via live user testing.
We began this process by drawing on our research of nonfinancial factors and account features that improve financial security to inform the features, imagery, and language for an online signup flow that would both provide the right level of detail and resonate with LMI workers. We created two versions of the demo with different features to test what is most important and impactful to LMI workers.
Once the demos were finalized, we recruited LMI participants and conducted live user testing with 10 individuals to get their feedback on the two demos. We wanted to understand what features—like the ability to set a savings goal and choose how much to save with each paycheck—were most important to users.
This sample user interface is intended to be “account type independent”: it could be used for a standard savings account, a cash management account, or even the after-tax account within a 401(k) plan (with a few additional product details and disclaimers). Regardless of the underlying account, our main aim was to understand which features are most effective in encouraging users to start saving.
The results from the user testing, combined with Commonwealth’s prior research and insights, now inform best practices for recordkeepers and other workplace benefits providers, such as fintechs, financial institutions, and others, in designing emergency savings solutions (whether in-plan or out-of-plan) to ensure the employee signup experience works for LMI employees and is accessible to all. Here are some design best practices:
Design Best Practices
- Find the right balance between simple and informative
Many users said webpages for financial solutions are often convoluted, making them hesitant to sign up for the product. An ideal web page should provide enough information to describe a product’s purpose and features without overwhelming users. Providing the right level of detail without complicated language also builds trust with users. One participant said, “[I] like that it isn’t information overload. It’s very upfront, tells me what it’s for, and it isn’t giving me any sort of a false sense. I don’t worry about the fine print. I feel like it’s a trustworthy product.”
- Build a two-tiered approach for emergency savings to cover expense shocks and prolonged income loss
Emergency savings funds are often framed by financial experts as enough to cover three to six months’ worth of expenses. However, that amount may feel out of reach for many LMI workers living paycheck to paycheck. Defining two categories of emergency savings—one to cover expense shocks and one to cover prolonged income loss—makes the saving journey accessible to those unable to afford larger savings goals and aligns with industry research as an effective way to define the components of emergency savings.
Importantly, this two-tiered approach also aligns with the needs of millions of LMI Americans who are looking for savings tools that allow them to build, use, and rebuild their savings, rather than accumulate a lump-sum savings amount. By initially focusing on a smaller savings goal, the notion of building, using, and rebuilding feels more accessible.
- Offer small-dollar contribution amounts
Small-dollar contribution amounts make saving feasible particularly for LMI workers who may live paycheck to paycheck or don’t have much room in their monthly budgets. Starting with $5 or $10 per paycheck felt manageable to many users. One participant said, “[I] like the low amounts. They feel doable for people in normal circumstances.”
- Provide users with an option to personalize their savings goal
Provide users with an option to personalize their savings goal and a timeline of how long it will take to reach their goal. We recommend savings goals in the range of $500-$2,000. This range is consistent with the notion of the “cycle of savings”, which defines savings as an ongoing act of building, using, and replenishing savings, and identifies savings as for short- and medium-term uses and goals. Eighty percent of users said they prefer to have a goal and “having a time frame associated with saving gives you a concrete idea of what you’re going to accomplish.”
- Provide liquidity with an associated debit card
Several users expressed concern over how quickly they could access their funds when needed. ACH transfers can take several days to show up in users’ bank accounts, which is too long to wait for many emergency expenses. Similarly, Commonwealth research has found that liquidity is key to ensuring the emergency savings account is useful to LMI workers in need and prevents the use of costly alternatives. We recommend using a debit card, a tool already familiar to most consumers. The debit card could be named an “emergency fund card” or similar to imply that the card is meant for unexpected expenses, not daily transactions. This is analogous to calling the debit card associated with Health Savings Accounts (HSA) cards. Further research on the name of the card is needed to better understand what name resonates with consumers.
- Frame saving as a journey
Many LMI workers report that building up a savings account to cover three to six months’ worth of expenses isn’t feasible. Commonwealth research found that positioning saving as a journey, with even $5 saved as a positive first step, encourages people and makes them feel that they too can start saving. Many users described the journey imagery in the demo as “very good symbolism. It’s helping me take the first step [on my savings journey].”
Increase Uptake with Accessible Design
The savings crisis impacts many American workers. Employees are often unable to cover unexpected expenses and many turn to their 401(k) accounts to cover such expenses. Offering accessible, low-fee emergency savings solutions through the employer channel fills a market gap and provides an on-ramp to longer-term financial wellbeing.
As more employers demand solutions to support their employees’ financial wellbeing, recordkeepers and workplace providers should have the opportunity to maximize the effectiveness of employer-based emergency savings solutions by incorporating these best practices into their offerings. Designing a workplace emergency savings account that works for LMI employees ensures that it will be accessible to all workers and is an important step in supporting financially vulnerable workers.
These best practices are guidance to recordkeepers, payroll and other workplace platform/infrastructure providers offering emergency savings solutions. Click here to view our simple, effective signup flow. Recordkeepers and B2B providers interested in learning how we can support you in developing quality emergency savings products and increasing user engagement are invited to reach out to Nick Maynard at email@example.com.
BlackRock’s Emergency Savings Initiative
BlackRock announced a $50 million philanthropic commitment to help millions of people living on low to moderate incomes gain access to and increase usage of proven savings strategies and tools – ultimately helping them establish an important safety net. The size and scale of the savings problem requires the knowledge and expertise of established industry experts that are recognized leaders in savings research and interventions on an individual and corporate level. Led by its Social Impact team, BlackRock is partnering with innovative industry experts Common Cents Lab, Commonwealth, and the Financial Health Network to give the initiative a comprehensive and multilayered approach to address the savings crisis.