Nearly half of Americans (46%) would struggle to cover an emergency expense costing $400, according to the May 2016 “Report on the Economic Well-Being of U.S. Households in 2015” from the Federal Reserve Board. When faced with a $400 bill, a large number of respondents reported they would either need to sell something or borrow money to cover the expense.
The issue of emergency funds spans income levels. According to a poll conducted by The Associated Press-NORC Center for Public Affairs Research, three-quarters of households making less than $50,000 per year and two-thirds of those making $50-100,000 per year would have difficulty covering an unexpected $1,000. Of households making more than $100,000 per year, some 38 percent would have similar difficulties.
Faced with unexpected expenses, American’s report a variety of solutions to scrape together the money required. These include selling items or assets; borrowing from a bank, friends or family; charging to a credit card; and, in extreme cases, borrowing from payday lenders.
Part of this financial insecurity is the tendency for American’s to avoid savings – a potential holdover from the 1970s and 1980s when inflation ate into the value of money held in savings accounts. Contributing to this continued mentality is a lack of standard financial education and a combination of volatile income and expenses.
The combination of unknowns creates a situation in which even small emergencies can create a financial crisis. Lower income individuals, those lacking available credit and people with friends and/or family troubles may find money emergencies especially worrisome.
Fortunately, there are ways for employers to help alleviate financial stress for employees so they can better focus on their work.
On-Site ATMs – Providing cash access at the office can be a big relief. Whether they utilize a bank account, prepaid cards or payroll access cards, employees can review account balances and access their funds in the safety of a trusted, indoor location without the need to utilize valuable time or fuel.
Financial Education – Employers can partner with local financial institutions to provide valuable education on appropriately managing household finances. Classes can include information on debt management, the importance of emergency funds, building your credit and preparing for retirement.
Money Earned® Options – Implementing a “money earned access” program can help employees avoid resorting to high interest rate credit cards and predatory payday lenders. These systems provide employees with the ability to utilize funds based on hours they have already worked but for which they have not yet been paid. Money is paid out when needed and the equivalent amount is subtracted from their next paycheck. Unlike payday loans, money earned systems cap payouts to 50 percent or less of the employees available wages and charge a one-time fee rather than ongoing interest.
Many Americans continue to live paycheck-to-paycheck, with little to no savings. Under these circumstances financial education and affordable solutions like the Money Earned program are more important than ever to ensure employee piece of mind.
ATMatWork offers the Money Earned® program to Empower employees to handle unexpected expenses or financial crisis without resorting to high interest payday loans. Learn More>>