By John Thompson, Chief Program Officer, Financial Health Network
People living in America do not have enough saved and are not saving enough. In May, the Federal Reserve Bank noted that most Americans don’t even have $400 available for an emergency, and this is especially true for half of low- to moderate-income Americans.
But is our industry doing enough to help people save? Our CEO Jennifer Tescher recently wrote a Forbes article opining that financial education alone is not enough to change the script. Why? Because people need more coaching, personalized product recommendations and digital financial health management tools to assess, develop, and act on a plan to improve their overall financial health.
Helping people save more effectively has been a central part of my career, from my time at H&R Block, through my own startup company, and ultimately to my time with Financial Health Network. As our research into measuring financial health shows, improving savings can unlock meaningful opportunities for people to improve their lives. U.S. Financial Health Pulse statistics related to savings are staggering: 47% of people are spending more than their income. 45% do not have three months saved for living expenses.
The financial services industry could be helping its customers save more effectively through different touch points every month and sometimes every day — on payday, at tax time, and when benefits are distributed. But this needs to go beyond just opening an account, crossing our fingers, and hoping the customer does the ‘right thing’. As researchers and practitioners, we know so much more about the techniques that can work such as framing, nudging, defaulting, automating, rewarding, supporting, sharing, and more. It’s high time to put these learnings to work, at scale, in all the places that count.
In February 2019, BlackRock announced a $50 million commitment to help people living on low- to moderate-incomes gain access to and increase usage of proven savings strategies and tools — ultimately helping them establish an important safety net. Through collaboration between leading industry experts and companies, the initiative aims to test and scale high-quality, proven savings innovations.
The Financial Health Network is thrilled to be part of this initiative because our mission over the last 15 years has been to focus on defining and helping industry leaders and partners make financial health available for all. In addition to working with BlackRock, we are joining two industry leaders on the Blackrock program who have innovated and trail blazed in the personal savings field on this initiative:
- Commonwealth has designed effective innovations, products and policies to accumulate more than $1 billion in savings over the last two decades. In fact, they innovated split tax refunds, are a key driver for the existence of the form 8888 exists, and were behind the prize-linked savings’ emergence in the US, and the leader in applying gamification to savings.
- Common Cents Lab is the behavior research lab within the Center for Advanced Hindsight at Duke University, and a key reason that the power of behavioral economics is being applied to solve challenges, including financial and money. They have partnered with more than 50 organizations including credit unions, banks, tech, nonprofits and governments to redesign products and services to improve financial health, and are the source of innumerable publications exploring how to harness the powerful role of emotion, morality, self-control, and motivation in decision making.
Through my career in the private sector and in the nonprofit world, I’ve been able to see the impact of successful savings on people’s confidence, stress, and financial outcomes. I’ve seen how motivating it was for my teams to work on and be successful at something more than just making money. I’ve seen how helping people be more successful savers led to improvements in our business (although it was hard to see on the front end).
For the next three years, my colleagues and I at the Financial Health Network along with BlackRock, Commonwealth and Common Cents Lab are going to be engaging with employers, platforms, and financial institutions of all kinds, to help them apply the most effective techniques to help their customers and employees save. We’ll be testing new ideas too. In the process, we’ll impact millions of families. We’ll help this country get better at this most basic behavior — saving for soon. This is what I signed up for.
We hope that you’ll follow our journey as we work together on BlackRock’s Emergency Savings Initiative at https://savingsproject.org/. You can learn more about the partners, industry experts and organizations that will be participating in this effort. You’ll also find important research, articles and thought leadership on this topic. And if you’re an employer or provider who’d like to get involved, we’d love to hear from you, give us a call.
BlackRock’s Emergency Savings Initiative is a three-year commitment to help people living on low- to moderate income gain access to and increase usage of proven savings strategies and tools to help them establish an important safety net. Led by their Social Impact team, BlackRock, along with nonprofit experts known for their innovative approach to consumer finance, Financial Health Network (formerly CFSI), Commonwealth, and Common Cents Lab, are working to address the crisis and fuel the future of savings innovation. This post is content developed in conjunction with the Emergency Savings Initiative project.