It’s time for companies to step up.
- Many workers suffer from economic stress.
- Employers may step up and help, which in turn may benefit them.
- Matched donations to emergency funds can make employees feel more loyal and positive about their workplace.
It’s fairly common for employers (at least large companies) to sponsor 401(k) plans for retirement savings purposes. These plans can be very helpful in helping workers build long-term savings, but they won’t help you if you need the money in the short term. This is because taking her 401(k) plan before age 59½ comes with severe penalties.
However, most employers do not have plans to allow workers to save for short-term expenses or emergencies, so many people are severely short of emergency funds. This means that when an unscheduled bill is issued, you are at risk of incurring a large amount of debt.
In fact, as a general rule, it’s a good idea to save enough money to cover at least three months’ living expenses. But many Americans don’t have savings close to that amount.
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On a recent Motley Fool podcast, financial guru Suze Oman said she believes it’s time for companies to step up and start helping employees grow their savings accounts. rice field. Here’s why:
Easy things employers can do
Orman isn’t suggesting that employers open savings accounts for employees left and right and pour thousands of dollars into them. Rather, she suggests offering modest matching contributions to savings in the same way that 401(k) plans are commonly done.
For example, a company can offer a $2,500 emergency funding contribution if an employee puts a lot of their money in a particular year. Orman argues that such small sums are a bucket drop for some companies with deep pockets. But for low- and middle-income earners, it can make a big difference.
Getting help to build emergency savings not only benefits workers, but it could also benefit the companies that employ them, Orman argues.
Employees who get a company match with a savings account tend to appreciate the benefits. It can make them more loyal. And at a time when employee turnover is a major issue, that’s a great perk.
Helping build emergency savings can also reduce worker stress. And when employees aren’t obsessed with money matters, they may be able to focus their energies on being productive at work instead.
Clearly, employers have a lot to gain by helping workers build emergency savings. As such, it would be beneficial for companies to consider putting in place a program to make that happen.
This is not to say that employers should discourage participation in 401(k) plans. It’s important to build a retirement nest egg over the years to avoid financial troubles down the road.
But it’s easy to argue that while a large 401(k) balance is important, emergency savings are even more important. And companies stepping up can make a big difference.
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