Building Saving Confidence Through Split Deposit

By Carolyn Pemberton, Senior Program Manager, America Saves

The ability to save money to begin building wealth is not equally attainable across income levels and racial groups. The COVID Pandemic of 2020 has exposed how wide the gap is between individuals with savings and individuals without savings. Americans who have encountered racial discrimination or who lack access to safe and affordable saving accounts face greater obstacles to build savings — resources that help respond to emergencies such as a job loss or medical bills, help achieve dreams such as home ownership or attending college or simply provide peace of mind knowing there is money in the bank.

Coping With Emergencies

Picture this. An hourly employee comes to your Human Resource Department asking about a payroll advance because of an immediate need for cash to pay for an unexpected expense such as a car repair or medical bills. Using your company’s policy for granting advances, HR staff reviews details with the employee, acquires the necessary signatures, calculates the taxes and deductions needed to be withdrawn and then finalizes the agreement with the employee. A lot of extra work.

Now picture this. A salaried employee facing a similar unexpected expense is able to withdraw money from an emergency saving account that has been funded through split deposit that you the employer promoted through a workplace saving program. This employee doesn’t have to ask for an advance because of being encouraged to save automatically through the direct deposit system your organization uses to pay employees.

Opportunity Through Automation

Automation is key here for the employer and employee. Employers save time and money by processing payroll through direct deposit. Employees save more easily and regularly through split deposit.

Employers looking for simple strategies to enhance the financial wellbeing of their workforce can turn to the most basic and yet elegant of strategies — saving through split deposit. That is the system of having a paycheck regularly and automatically split into two accounts — a transactional or checking account and a saving account. The process of split deposit supports the most basic of financial tenants — pay yourself first. Without having to set up any new systems, employers are able to help build and support all of their employees’ savings habits.

And it works! Among employees who responded to survey questions about using split deposit, 95% reported that split deposit has helped them save more easily and 90% say that split deposit has helped them feel more confident about saving money.

Using split deposit to encourage automatic savings among employees does not involve creating complicated new programs, adhering to nondiscrimination rules, establishing new internal systems, or funding incentivized saving accounts.

Simplicity At Work

Human Resource and wellness benefits professionals frequently say that creating workplace saving programs is an important goal. The reality is many professionals are stretched thin addressing other needs so that these supplemental saving programs get pushed to the back burner. So the simple strategy of promoting split deposit is the easiest of solutions.

It comes down to communicating with employees that they can save most effectively through their paycheck. We know that it usually takes repeated exposure to new ideas for individuals to act. Messages about saving through split deposit can be incorporated into already established forms of communication so the wheel doesn’t have to be reinvented.

Let your employees know their financial wellbeing is important to you by helping them save automatically through split deposit for that next unexpected expense or that dream vacation they have always wanted or to pay off credit card debt. You’ll be helping to build confidence among your employees that they can save for their future goals.

Consumer Federation of America (CFA) is a non-profit organization advancing the consumer interest through research, advocacy, and education.

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