Most Americans aren’t prepared to handle emergency expenses when they crop up. They don’t have a substantial emergency fund that they can use to cover the expense in a hurry.
Research reveals that many Americans don’t even have $400 in savings to handle a surprise expense. If they had to cover an emergency, they’re likely to come up short. They might have to turn to alternative solutions like personal loans through CreditFresh to recover from the expense in a short amount of time. That is, if they meet the eligibility requirements for a personal loan and get their application approved. Then they could use borrowed funds to resolve the issue and follow a repayment plan later.
But personal loans shouldn’t be used as primary safety nets in emergencies. They should be last resorts!
Employers can set up better safety nets for their employees. Doing this will guarantee that their employees don’t feel compelled to turn to “last resorts” right away. They will have other methods of handling an emergency.
Safety Nets Workplaces Can Offer
Table of Contents
Workplaces can offer on-demand payroll to their employees. On-demand payroll allows employees to request a portion of their paycheck before the official payday has arrived. As long as they’ve earned the funds already, they can submit a request to access those funds early.
On-demand payroll can offer financial relief to employees that are facing emergency expenses at inconvenient times. They know that if they only had their paycheck a little earlier, they could pay off the expense. The timing is just wrong.
With on-demand payroll, they can skip the wait and access that money quickly.
Emergency Savings Account
Workplaces can offer Emergency Savings Accounts (ESAs) to employees. Emergency Savings Accounts are employer-sponsored savings accounts designed to encourage employees to set aside some of their earnings into an emergency fund. If an employee signs up for this savings plan, they will agree to deduct a portion of their paycheck and transfer it into their ESA. Ideally, they should not withdraw any funds from their ESA unless they absolutely need to.
Employers can offer matching contributions for ESAs. Promising an extra boost in savings would encourage even the most hesitant employees to sign up for this savings plan.
Flexible Spending Account
Flexible Spending Accounts (FSAs) are employer-sponsored, tax-advantaged saving/spending accounts. Employees agree to automatically deduct a portion of their paychecks and transfer it into their accounts. FSA contributions do not roll over. So, employees will have a year to go through their account balance or else risk losing it.
What are FSAs for? FSAs are designed to help employees pay for medical expenses that aren’t covered by their health insurance. They can use these funds for their own medical expenses, as well as the medical expenses for their spouse and dependents.
An FSA could be an extremely useful safety net during a medical-related emergency. Employees could use the savings to pay for prescription medications, dental care and other crucial expenses.
Insurance plans can inevitably help employees financially manage emergencies both big and small. Some types of insurance that workplaces can include in their benefits package are dental insurance, short-term disability insurance, long-term disability insurance and critical illness insurance. These can all be effective safety nets during the worst of times.
As you can see, workplaces can give all of their employees a helping hand with financial emergencies. Employers can set up all of these safety nets.