BlackRock is working with other companies to find ways Americans can save on emergency savings
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Many Americans do not have the cash to meet unexpected emergency costs, a reality that has become more apparent during the Covid-19 pandemic.
This has led to a growing call for businesses to step in and adopt programs designed to help people dump those funds away for rainy days.
Investment firm BlackRock announced on Wednesday that it is adding five new corporate partners to its $ 50 million philanthropic emergency savings initiative, which it launched in 2019 to address the issue.
New entrants include payroll company ADP, consumer electronics retailer Best Buy, financial technology company Self Financial, regional bank Truist and digital bank Varo.
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In order to participate in the program, companies must agree to take action to resolve emergencies within one year and to share anonymized data on the results of these efforts with the initiative. In return, they will have access to the expertise BlackRock makes available through partners such as the Common Cents Lab, Commonwealth and the Financial Health Network.
A recent retirement hearing held at Capitol Hill highlighted the main hurdle to increasing long-term savings: people tend to withdraw money from their retirement accounts to pay for short-term emergencies.
A 2018 Federal Reserve report found that 40% of Americans would have difficulty paying unexpected $ 400 spending. A survey published by Bankrate.com in January shows that these cash reserves are still insufficient for many people. Only 39% of people are able to use savings to pay for an emergency of $ 1,000.
According to Deborah Winshel, BlackRock global director of social impact and president of the BlackRock Foundation, more and more companies have turned to BlackRock for help launching emergency savings initiatives amid Covid-19.
“Covid just exposed what was already a serious problem,” said Winshel. “It not only reinforced it, but made it an even broader and deeper topic for so many people.”
The problem is not that people do not want to make short-term savings, but that they often lack the ability to easily and automatically determine their ability to do so.
“Almost everyone, regardless of income level, wants to save,” said Winshel.
New program participants like Truist plan to test programs that will help change this.
Truist, which emerged from the combination of the regional banks SunTrust and BB&T, primarily serves the southeastern United States
According to Arijit Roy, Strategy Manager of the Retail Community Bank at Truist, the focus is on traditional mass market customers as well as on the segment with and without bank details.
Almost everyone, regardless of income level, wants to save.
Global Head of Social Impact, BlackRock
More than 25% of the population living in Truist’s footprint falls into the category of those who couldn’t pay for $ 400, Roy said.
By working with BlackRock, Truist plans to launch a pilot program this summer to encourage this population to save. Rather than offering traditional sign-up bonuses for savings, rewards are triggered by achieving compensation goals.
The pilot could ultimately reach up to several thousand people and potentially be applied to the bank’s other customer segments, Roy said.
Working with BlackRock has helped Self Financial, a “mission-driven” financial technology company based in Austin, Texas, raise awareness of savings, said Brett Billick, chief marketing officer.
Self, which has been around for about six years, has mainly focused on helping people build credit.
However, with the help of BlackRock, the company launched a new “Dream Builder” campaign late last year with ads on TV, Facebook, YouTube and radio to inspire people to achieve their financial goals.
Since then, Self has seen pledged savings increase 49% over the six months prior to the initiative’s launch, according to Billick. Additionally, 80% of customers have expressed an interest in continuing to work with the company after repairing their credit to further increase their cash balance.
The results are consistent with a growing awareness among the company’s customers of the need for emergency saving, Billick said.
“You are now realizing after that amount of time that this is long-term financial health planning,” said Billick. “It’s an incredibly important component, especially if there is ever another shock like this.”