Surprise expenses can come out of nowhere and really cause some bumps in your financial road like an unexpected leaky roof, car accident, or medical bill, just to name a few. Even those of us who are fortunate enough to stand on a firm financial foot can easily stumble and find ourselves in trouble if these types of costs mount up quickly.
Businesses and employers often see firsthand the stress their employees face and the impact it has on their work performance when a financial emergency happens. If this sounds all too familiar, you may want to consider starting an emergency savings fund for your employees.
Workplace emergency savings funds serve as great safety nets for employees coping with unforeseen expenses and businesses are finding these rainy-day funds have a significant and positive impact at a low cost.
Let’s explore how an emergency savings fund works and the benefits of establishing one.
The Emergency Savings Fund Defined
Quite simply, an emergency savings fund is meant for financial emergencies. It’s money that is set aside for unplanned expenses, such as an unexpected visit to the emergency room or last-minute home repair.
Types of Plans
Your business can set up an emergency savings fund in a variety of ways, such as:
Employee-only contributions – Employees opt to contribute money from their paychecks in the form of built-in payroll deductions.
Employer contributions – As an employer, you can incentivize your employees to contribute by offering to match their contributions up to a set dollar amount. It's a great way to sweeten the deal!
Crowdfunded approach – A true “emergency fund,” this model involves encouraging employees to contribute small amounts of money throughout the year to a general fund. In the event of an emergency, staff members can apply for financial relief as needed.
Educate Your Employees
An emergency savings fund is an important facet of financial health. Consider inviting a financial advisor to speak at your place of business or host a webinar to discuss the importance of financial planning and help empower your employees to improve their money management skills.
Benefits of an Emergency Savings Fund
While the potential employee benefits of an appropriate emergency savings fund are obvious, these plans can provide significant advantages to employers as well. While safeguarding the overall financial wellness of your employees, your company’s emergency savings fund can actively promote...
- Higher loyalty and retention – In both good times and bad, the peace of mind an emergency savings fund offers should not be underestimated. It not only serves as an attractive benefit, but it can save your employees from making difficult life decisions that may take them away from your company.
- Increased productivity – High levels of financial stress can wreak havoc on professional focus. Whether they are facing an immediate crisis or worrying about future risks, employees protected by an emergency savings fund can better concentrate on work rather than personal concerns.
See our article “Why It’s Important to Build an Emergency Savings Fund to Avoid a Crisis,” to learn more.
Being responsive to the financial concerns your employees are facing during these uncertain times can not only be a win for your employees, but also for your business. And it’s important to keep in mind what your employees may be looking for as we begin to make our way to a post-pandemic environment.
If you think an emergency savings fund is right for your business, start by talking to your Human Resources department, then choose the right partner to help you develop a plan for your organization. Our financial advisors can answer your questions and tailor solutions for your business – so you can start helping your employees cover emergency expenses they might otherwise have a difficult time managing.
For more information about emergency savings funds and how to establish one at your company, contact a Lakeland Bank advisor. We are here to help provide guidance to reach a financial plan that works for you, your employees and your business!