Op-Ed: It’s never too early to save for that emergency


During tax season, people have a lot on their minds, like tax forms, numbers and that looming April 15 deadline. One thing many aren’t thinking about is the opportunity that refunds present to ramp up their emergency savings.

About 72% of Americans received a refund on their taxes in 2019. This extra jolt of cash can be a perfect chance to start — or increase — rainy-day savings funds. The IRS already makes it easy for filers by allowing them to deposit their refund into up to three different accounts. People can automatically deposit portions of their tax refund into a checking account, as well as a savings account, or they can buy a U.S. savings bond.

Unfortunately, statistics show too many Americans aren’t saving for the unexpected — during tax time or any other period. According to the Federal Reserve, 27% of adults would borrow or sell something to cover a $400 unexpected expense. Another 12% would not be able to cover the expense at all.

A survey conducted by the Financial Industry Regulatory Authority in 2018 showed that less than half of American adults have an emergency fund sufficient to cover three months’ worth of expenses.

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This is troubling, because our research shows a strong association between savings and the whole picture of a consumer’s financial well-being. Financial well-being means security and freedom — now and in the future.

If people don’t save for emergencies, they cannot buffer themselves against unexpected shocks in the short term. And if they can’t do that, it’s going to be harder for them to recover and achieve bigger financial goals, such as parents saving for college for their kids or people saving for retirement.

Through the Consumer Financial Protection Bureau’s “Start Small, Save Up” initiative, we work to increase opportunities for people to save and to empower them to achieve their emergency savings goals. Promoting savings when people are expecting their refunds is one such opportunity and it is now part of a broader, three-part strategy.

First, we plan to work with employers to prioritize emergency savings for their workers. For example, we support the idea of offering employees direct deposit options that make savings automatic, sending part of each paycheck into a savings account.

Second, the Start Small, Save Up initiative will work directly with a select number of communities around the country. We will explore savings barriers that are specific to where people live. Then we can work with local leaders and institutions to expand and adapt proven solutions — or help develop new ones.

Third, Start Small, Save Up will work with organizations in all sectors that have been involved with savings. We know businesses, non-profits, academic institutions, and local governments have been at this longer than we have. So we aren’t here to start from scratch, but rather to use our platform and unique role to highlight the solutions that exist, to encourage new and even better solutions, and to get the right tools in front of the people who can benefit most from them.

To learn more about Start Small, Save Up and to access resources, visit http://www.cfpb.gov/save.

— By Kathleen L. Kraninger, director of the Consumer Financial Protection Bureau

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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