Employees can save more of their paycheck with auto-deduction
Automated deposits are an easy and effective way to build a bigger bank balance and plan for short and long-term goals.
Financial wellness platform Even is launching a new product that allocates up to 30% of an employee's paycheck to savings for up to three distinct goals via direct deposit. Employees will be able to automatically transfer up to 10% of each paycheck for each goal.
“Because we're connected to your bank account and the employer systems, we intelligently suggest how much you can afford to save,” says Jon Schlossberg, CEO of Even. “Then the algorithms that we have will help you figure out what to save that money toward.”
The new savings function can also be used to define personalized goals, adjust savings goals, or withdraw money from savings accounts at any time for free. Schlossberg says the most popular savings goals employees are setting are general savings, car and housing.
To save successfully, it’s important that employees engage with their savings plan, Schlossberg says. Users of the app have deposited more than $21 million into their savings accounts, with 65% using the platform every week and 51% percent using it daily. On average, an Even savings user has deposited $167 after three months.
“From my experience in the benefits space, especially when it comes to financial health benefits, typically the problem is that people don't use them,” Schlossberg says. “And what comes from people not using them is that they don't work.”
Employers have started addressing financial health as a workplace benefit, as more people struggle to save. AARP found that 53% of American households lack an emergency savings account. When it comes to retirement, 22% of Americans have less than $5,000 saved for it, and 15% have no savings at all, according to a Northwestern Mutual study.
Schlossberg says the app can also assist with retirement savings, especially for workers who live paycheck to paycheck. By allocating their savings towards an emergency fund, they can shore up other money to pay for short-term expenses, without interfering with their longer term goals.
“Once people start saving for the short term by building up an emergency fund, all of a sudden, one of the goals that they can set up in the app is increasing their contribution to 401(k),” Schlossberg says. “[That puts] people in a much healthier position in the short term, which allows them to actually focus on safety for the long term.”
The Even app — which has employers like Walmart and Noodles & Company among its clients — already provides automated budgeting that considers upcoming pay cycles and bills, with notifications of how much is okay to spend at any given moment. Employees can also get early access to earned wages with no interest or transaction fees.