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The “cycle of savings” is the ongoing act of building, using, and replenishing savings that strengthens financial resiliency and allows families to invest in their financial security. This insight, highlighted in the Aspen Institute Financial Security Program’s new report, The Cycle of Savings: What We Gain When We Understand Savings as a Dynamic Process, emphasizes an important distinction Commonwealth has made between “dynamic” short-term emergency saving and traditional saving, which aims to build rising balances over time.* 

This framing of savings is not only critical to understanding how low- and moderate-income (LMI) households save and what they need in a savings product, but as the report highlights, it underscores a gap in the market. According to the report, an “insufficient number of savings products and services match” the way LMI households save. As financial institutions and fintechs look for more ways to support their customers through the COVID-19 pandemic, emergency saving products have never been more needed. Indeed, despite Americans’ deepened financial vulnerabilities, the overall U.S. savings rate, which had reached historic highs at the start of the pandemic, remains high. This commitment to saving demonstrates Americans’ desire to be better prepared for the immediate but uncertain future. 

As financial institutions and fintechs work to develop and champion emergency savings products, Commonwealth has identified five design principles to support the dynamic saving and unique needs of LMI households.

5 Design Principles for Emergency Savings Products

1. High liquidity: Emergency savings products designed with a build-use-rebuild philosophy enable users to easily and immediately access funds, allowing them to address emergency expenses before they incur additional costs like taking on debt. Research has shown that users have a strong preference for highly liquid emergency savings accounts. Further, the Federal Reserve Board’s Reg D amendment—which eliminates the six-per-month withdrawal limit on savings accounts— now makes it much easier to provide short-term liquid savings options, should banks and credit unions choose to enact it.

2. Low and transparently communicated costs: Typical features like monthly maintenance fees and minimum balance requirements can make savings prohibitively expensive. Additionally, hidden costs and fees can diminish consumer trust in financial institutions. Many financial institutions have reinstated fees that were waived as an initial response to COVID-19. Financial institutions now have a unique opportunity to rethink these fees and develop accessible products. 

3. Innovative distribution channels: Accessibility to a product can play a strong role in facilitating regular savings behavior. Meeting consumers at locations they find convenient and through channels they trust is key. The workplace is a key channel, as employees look to their employers for solutions. This is also a moment to explore other non-traditional channels. For instance, our work developing Prize Savings on the Walmart MoneyCard mobilized over $2 billion in savings in two years. The solution offers convenient access and high brand recall value, as Walmart is a frequent touchpoint for consumer financial transactions. Cross-sector collaboration like this will be pivotal to achieving scale and active usage. 

4. Positioning: Just as consumers rely on checking accounts for everyday planned expenses and traditional savings accounts for longer-term planned expenses and wealth building, emergency savings accounts have their own characteristics and meet distinct needs. For example, a recent Commonwealth study showed that participants who associated rainy day goals with their prize-linked savings accounts used their accounts more frequently to build and withdraw emergency funds. How financial institutions and fintechs position emergency savings products to customers is critical to their success. 

5. Digital transformation: Half of U.S. banking customers engage digitally with their financial institutions either “infrequently” or “not at all,” but as the pandemic accelerates digitalization, customers who are less digitally engaged will need extra support to keep up. According to PYMNTS, 79% of respondents say that digital experiences are important when choosing a primary financial institution, and some would switch to financial institutions that offer better mobile experiences. As financial institutions reimagine banking experiences in light of COVID-19, they now have an opportunity to rethink and re-design products and experiences that provide a frictionless customer journey for all customers, enhancing their customer service and competitiveness. 

Designing for a Financially Secure Future 

According to our national perception survey, 58% of respondents believe financial institutions need to do more to address financial insecurity. As COVID-19 continues to ravage the economy, financial institutions and fintechs are now in a unique position to help chart an inclusive recovery and address America’s widespread financial insecurity. Emergency savings are a critical coping strategythat enables families to stave off financial shocks and build resilience. By developing and promoting emergency savings products informed by human-centered approaches, financial institutions and fintechs can provide LMI customers with suitable avenues to build much needed short-term savings, and advance financial resilience and security. 

*Commonwealth is a member of the Aspen Institute Financial Security Program’s Consumer Insights Collaborative and contributed to the writing of this report.


Commonwealth is working with financial institutions and fintechs to explore various ways we can improve liquid emergency savings accounts for financially vulnerable people. Through BlackRock’s Emergency Savings Initiative, Commonwealth and its partners are collaborating with a range of stakeholders to offer emergency savings solutions. Please contact Nick Maynard at info@buildcommonwealth.org to learn more about potential partnership opportunities.

Commonwealth’s Financial Resilience Project: COVID Stories, Rapid Insightsclosely tracks the financial lives of low- and moderate-income households over the course of several months. Our project follows 56 households from 24 states across the United States to gain rapid insights in near real-time on how financially vulnerable people are navigating the crisis. Read more about the study here.

Low- and moderate-income (LMI) households have long used a range of financial coping strategies to manage their financial lives. These households employ savings when they can, live on strict budgets, and use bill prioritization as a financial management tool. All too often these households struggle to stay afloat, their coping strategies tested through successive financial crises, making them vulnerable to additional financial shocks. 

In many ways, the current crisis is an extreme version of the volatility and uncertainty LMI households have always faced, but their coping strategies are now being tested in new ways. State-mandated shutdowns and the moratoriums on debt payments made some of these strategies easier to implement for these households. However, the financial challenges faced by these households is more than offset by these benefits. Millions of families continue to experience unemployment while additional supports (such as supplemental unemployment insurance benefits) are being reduced and are due to be eliminated; it is becoming increasingly difficult for these households to stay afloat. 

This brief focuses on the households in our study that have experienced the most dramatic loss of income to understand which strategies they are employing and how. The brief also previews what is to come for families who have already lost jobs and are now facing a dramatic loss of income as supplemental unemployment benefits have expired and been replaced with a reduced and short-term benefit. The thousands of workers in the airline and hospitality industries who will likely be laid off in the fall will also face these challenges. 

Financial Coping Strategies: How Households Are Staying Afloat During COVID-19, the third in our Financial Resilience Project brief series, shares our latest insights on how households that have experienced dramatic and sustained loss of income are staying afloat. Some of our key findings: 

  • Households employed three strategies the most: using accumulated savings, missing bills, and reducing expenses.
  • Households tended to employ two strategies at a time due to the complexity of their lives and of managing multiple strategies. 
  • As the crisis continues, missing bills or accumulating debt will have long-term negative impacts on household finances. 

Read the brief to learn how households are using these coping strategies to stay afloat and the considerations for policymakers, financial institutions, and employers seeking to support these households in building financial resilience now and beyond COVID.  

Sign up for our newsletter to get notified about these stories and insights, along with other Commonwealth research.

Commonwealth’s “Saving Through a Crisis” series shares our latest research, in partnership with the Defined Contribution Institutional Investment Association’s Retirement Research Center, on how low- to moderate-income plan participants are handling their retirement savings during the pandemic.

Americans are now about half a year into the COVID-19 pandemic and the resulting recession, and lower-income Americans continue to bear the brunt of the economic downturn. To understand how these Americans are managing the pandemic’s impact to their financial security, Commonwealth is partnering with the Defined Contribution Institutional Investment Association’s Retirement Research Center on a series of surveys with low- to moderate-income (LMI) plan participants on how they are handling their finances and retirement savings during COVID-19. The survey1 was fielded between July 2 and July 15, two months after our first survey. This second survey fielding occurred before:

Although our focus is on workplace retirement savings, in both our first and second survey, we found that relatively few people are taking withdrawals or 401(k) loans during the pandemic (6% and 8% of respondents in the first and second surveys, respectively). 

Instead, they are reducing their expenses, charging more to their credit cards, and withdrawing from their emergency savings.LMI plan participants are turning to emergency savings for financial stability in this crisis. The data indicate that those who save for emergencies are less likely to tap their retirement savings, and those who self-report as less financially stable express strong interest in a workplace emergency savings program.

Here we outline three key findings from the second survey and what employers can do to support emergency savings:

1. Plan participants are using their emergency savings to weather the pandemic: Even during the pandemic, the majority of LMI plan participants have been saving for emergencies: 66% of respondents have saved for emergencies since February of this year. Respondents are also tapping these savings at high rates, with 42% of respondents who save for emergencies having withdrawn from those funds in the past seven months. Respondents who have lost income are twice as likely to have done so; of respondents who save for emergencies and have lost income during the pandemic, 65% have withdrawn from their emergency savings, compared with 33% of respondents who save for emergencies but have not lost income.

2. Current savers are half as likely to dip into their retirement savings during the pandemic: LMI plan participants who have saved for emergencies since the pandemic hit are half as likely to tap their retirement savings: 8% of savers have taken or are planning to take a loan or withdrawal, compared with 16% of non savers. For some respondents, this connection might be caused by income loss or another financial shock that simultaneously drives retirement withdrawal and makes saving more difficult; respondents who have lost income since February 1 are less likely to currently save for emergencies (52% vs. 76% of those with unchanged or increased income) and are more likely to take or plan to take a loan or withdrawal from their retirement plan (17% vs. 7% of those with unchanged or increased income).

3. A low self-assessment of financial well-being drives employees to turn to their workplace for support: An analysis2 of the survey results found respondents with lower self-reported financial well-being3 are more likely to be interested in a workplace emergency savings program. 53% of respondents below the median score of financial well-being (53 points) were very or extremely interested in a workplace emergency savings program, vs. 40% of respondents scoring above the median.

Unmet Demand for Workplace Emergency Savings Programs

These survey results indicate that emergency savings are serving their intended purpose—both for solving day-to-day pinches and as a cushion for more severe hardships such as job loss—but there is a gap between LMI Americans’ intent to save for emergencies and the availability of high-quality savings accounts. Commonwealth has found in recent qualitative research that the lack of appropriate savings tools is a primary barrier to saving during COVID-19, particularly among people trying to save for the first time. Our survey indicates an unmet demand specifically for employer-provided tools: 46% of survey respondents are very or extremely interested in a workplace emergency savings program, but few employers offer one today.

Moreover, our third finding suggests that employers who offer these emergency savings programs would see increased interest in these programs during times of greater financial security and greater interest among employees who report struggling with financial security. The data suggest that these programs help those who need them most.

Employers and registered investment advisors (RIAs) can request that retirement record keepers meet this unmet demand by offering an in- or out-of-plan emergency savings solution in their workplace retirement plans. As the recession deepens and more Americans struggle to make ends meet, employers should act quickly to support their employees—and will find that reducing their employees’ financial stress has a positive impact on their corporate bottom line as well. The need for these programs has always existed, however, there has been no greater need than now; supporting workers in building emergency savings and financial security will have a lasting impact.

We will continue to track LMI plan participants’ actions in the coming months. Check our website for new research or sign up for our newsletter here to receive our posts and final reports as soon as they are released. Through BlackRock’s Emergency Savings Initiative, Commonwealth and its partners are exploring the introduction of new emergency savings solutions at scale, including working with record keepers to develop and launch emergency savings tools both in-plan and out-of-plan. If you are a plan sponsor or record keeper interested in offering emergency savings and would like to learn more about how you can support your plan participants, contact Nick Maynard at info@buildcommonwealth.org.

[1] This survey collected 500 responses from LMI defined contribution plan participants (between $20,000 and $75,000 in household income). Respondents must 1) have traditional (W-2) part- or full-time employment or had as of February 1, 2020 and 2) have a defined contribution plan that they currently contribute to or had contributed to on February 1, 2020. The plan must be sponsored by their current employer or their employer as of February 1, 2020.

[2] A logistic regression was run on the survey data. Due to some blank (“Not sure”) responses, the sample size for the regression was 471.

[3] Self-assessed financial well-being was measured by the Consumer Financial Protection Bureau’s abbreviated 5-item Financial Well-being Scale questionnaire. The scale measures financial well-being as including four elements: control over day-to-day, month-to-month finances; financial freedom to make choices to enjoy life; capacity to absorb a financial shock; and being on track to meet financial goals

COVID-19 has been a rollercoaster for many of us. The current crisis is a simultaneous assault on so many aspects of our lives  – our health, how we work, how children go to school, how we  recognize long standing racial inequities in our society, and multiple aspects of our financial lives. 

Since June of 2020, Commonwealth has been conducting bi-weekly interviews with fifty-six households across the United States to identify how low- and moderate-income households manage their finances during a crisis.  While many studies exist that ask the hypothetical question “what would you do if…”,  Commonwealth’s Financial Resilience Project provides near real-time insights into what people are doing right now in the middle of a very real crisis. 

Our webinar Financial Resiliency Strategies: How Lower Income Households are Weathering COVID, moderated by Melissa Gopnik, Senior Vice President at Commonwealth, featured research findings presented by Dr. Daryl Collins and a discussion with her and Jose Miranda Jr., Director of Economic Justice at Chhaya, on household financial volatility, the role of savings, and financial strategies households are using to manage this crisis. Panelists connected the findings to actions employers, financial institutions, fintechs, and policy makers can take to support low-and moderate-income households now and post-crisis. 

Key Takeaways:

People can’t achieve financial resilience on their own. 

“We don’t think of financial resilience as a trait that you’re born with, or a virtue,” explained Melissa Gopnik. Financial resilience is a result of the financial tools that people have access to and that are designed to meet specific financial needs, wants, and aspirations. A greater level of financial resilience is a result of the actions of employers, financial institutions, and policy makers choose to take. 

A range of responses is needed to support low- and moderate-income households. 

The financial impact of the current crises varies even among low- and moderate-income households – some households are seeing dramatic decreases in income, others are seeing stable income, and others are seeing increases in income. Further, longstanding systemic inequities in the financial system impact how households are able to respond. Melissa Gopnik pointed out that Black, Latinx, and women-led households were impacted most by COVID-19 and by the economic crisis. Jose Miranda Jr. pointed out that access to support such as PPP loans was not distributed equally, with immigrant-owned small businesses having a more difficult time accessing loans. Responses that build financial resilience need to account for the unique ways households have experienced the pandemic as well as what tools households need better access to. 

Employers, financial institutions, fintechs, and government all have a role to play. 

Commonwealth’s research underscored the importance of households having emergency savings to weather this financial crisis. Daryl Collins shared that of households that had emergency savings before the pandemic, only 8% have had to borrow to cover their expenses, compared to 31% of those without savings. Jose Miranda pointed out that employers can play this role, as “the place where you get paid is a great junction to start thinking about savings.” Financial institutions can support their clients across the income spectrum by waiving overdraft fees and leveraging their access to customer data to provide more personalized financial recommendations. Finally, government support is needed for households struggling to make ends meet. Jose Miranda recommended that state and local government address housing insecurity and consider income replacement measures. 

Our country is experiencing an unprecedented perfect storm of crises – health, economic, political, and social. These crises have shone a spotlight on many of the existing fault lines in our systems. By bringing attention to the stories of how low- and moderate-income households are weathering these crises, we can uncover new opportunities for action now to deal with the immediate struggles that people are experiencing but also how to fix these fault lines to prevent future harm.

To read more about this research please visit the Financial Resilience Project web page where you can download the two briefs that we have already published. Each brief includes specific action steps that stakeholders—financial institutions, fintechs, employers, and government—can take. Employers can also get additional information about what they can do to support emergency savings on Blackrock’s Emergency Savings Initiative. We will be talking to these households through the end of September, so sign up for our newsletter to get the latest updates.

Fill out the below form to view a recording of the webinar.