The journey to financial security starts with savings, yet today, over 40% of Americans say they couldn’t come up with $400 in an emergency. The results are even worse for those with low incomes: 70% of the poorest households have no savings at all. Without any type of financial buffer, those living at the margins often wind up in a spiral of late fees, high-priced debt and poor credit, plunging them deeper into financial distress. Without savings as a foundation, access to return-generating assets becomes impossible, and the future aspirations of too many families become a dream denied.
Two decades’ worth of research and experimentation has made it clear that the desire to save is a universal aspiration, and, for many, barriers to accessing savings accounts have been removed. So what is standing in the way? Simply put, the decision to build up rainy day savings is still not easy or compelling for the millions of Americans living paycheck to paycheck.
As BlackRock’s CEO Larry Fink highlighted in his 2019 letter, many issues of public importance cannot be solved without corporate leadership. We believe that this widespread lack of financial resiliency is one challenge that requires such leadership, now more than ever.
That’s why BlackRock is working with experts to design innovative solutions that will help people build emergency savings. We see this philanthropic initiative as a natural extension of BlackRock’s mission to help people build better financial futures. While this effort initially focuses on the United States, we aim to extend our reach starting in 2020.
For the first phase of the initiative, we’re working with three nonprofit organizations: the Center for Financial Services Innovation (CFSI), Commonwealth and the Common Cents Lab at Duke University. We are funding these organizations to deploy their expertise and behavioral design capabilities to partner with companies, ultimately bringing tools, products and services that make saving easier and more compelling to employees and customers.
Reaching low-income households at scale is critical to solving the savings challenge. The initiative plans to work with businesses and organizations to offer “right place, right time” opportunities, enrolling and encouraging people to save. We are particularly interested in collaborating with employers and other work platforms, the tax preparation industry, financial services companies, and other sectors that reach low-income consumers at ripe moments to save.
We expect some of our partners will be unconventional, in that they haven’t previously been a conduit for savings. For instance, imagine a retailer that offers its customers the chance to direct coupon savings into a savings account. Or perhaps an employer that enables workers to automatically send a portion of each paycheck not only to a retirement account but also to an emergency savings account. Imagine a lender that directs a portion of each loan payment to a savings account.
Every organization has a stake in the financial health of its employees, its customers and the communities in which it operates. We look forward to working with like-minded companies and innovators to address this important issue.
To learn more, visit: www.savingsproject.org.
Deborah Winshel, Managing Director, serves as Global Head of Social Impact. leading the firm’s initiatives to create social impact on a global scale.