Why Everyone Should Petition Lawmakers to Make Emergency Savings Easier

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KEY POINTS

  • Many Americans are ill-equipped to handle an emergency expense.
  • A new bill, The Emergency Savings Act of 2022, seeks to have employers play a bigger role in helping employees save.


Employer support could make a huge difference when it comes to building savings.

You never know when an unplanned expense or financial emergency might arise. It could be something as minor as a small car repair or as major as a medical issue that keeps you out of work for months on end.

That's why it's so important to have personal cash reserves. In fact, ideally, you should have enough money in your savings account to cover a minimum of three months' worth of bills, and, ideally, up to a year's worth of expenses.

But many Americans are sorely lacking in emergency funds. The Federal Reserve reports that as of 2019, 37% of Americans could not cover a $400 emergency expense using cash from savings. And in a more recent survey by Branch, 48% of hourly workers have $0 saved for emergency purposes.

Part of the problem stems from the fact that workers don't have an easy means of seamlessly contributing money for emergency savings purposes. Many employers offer 401(k) plans that make it easy for workers to sock money away for retirement. But the number of companies offering workers emergency savings accounts is negligible.

A new bill is looking to change that. The Emergency Savings Act of 2022 has the goal of making workplace emergency savings accounts available to employees just as 401(k)s are. And it could be just the thing workers need to kick-start their savings efforts and gain the financial protection they need.

It's time for change

Many people get used to having money taken out of their paychecks for retirement savings purposes, and that alone helps them stay on track. But that option largely doesn't exist when it comes to workplace emergency savings accounts, even though companies like SecureSave allow employers to set these accounts up and contribute to them on workers' behalf.

Instead, workers are often left to fund their emergency savings as circumstances allow. But in recent months, that's been a tall order, what with inflation driving living costs up across the board.

Unfortunately, millions of Americans are now in a vulnerable spot due to a lack of emergency savings. That's why it's crucial to make the process easier on them -- and to make it easier for employers to support workers' emergency savings goals.

It's also why it pays to sign this petition calling for lawmakers to remove barriers to building savings. Pushing the Emergency Savings Act of 2022 through could open the door to savings opportunities for those who sorely lack rainy day funds.

A way to avoid harsh penalties and debt

Workers who lack emergency savings commonly resort to taking on costly debt when they need money in a pinch. But carrying debt means paying interest and, in some cases, risking credit score damage.

Similarly, taking an early retirement plan withdrawal is far from ideal when it comes to scrounging up emergency cash. Tapping an IRA or 401(k) plan prior to age 59 1/2 generally means facing an early withdrawal penalty, paying taxes on the money removed, and winding up short on retirement funds down the line.

Making emergency savings accounts more accessible to the public could spare so many people the consequences of debt or early retirement plan withdrawals. And so if you agree that emergency savings accounts are a workplace benefit everyone should be entitled to, don't hesitate to let your voice be heard by signing the aforementioned petition.

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