Economic Mobility Lab building resilience through emergency savings

After implementing an incentivized emergency savings pilot across two City departments, a promising percentage of employees started splitting-to-save, with participants projected to save an average of $3,463 by the end of the year.

Emerging from Resilient Boston, the City’s resilience and racial equity plan, the Economic Mobility Lab researches, develops, and tests ideas that support the economic stability and mobility of Bostonians during the times that matter most.

One of those moments is an emergency or unexpected expense. A car breaking down, an unforeseen medical procedure, or a family emergency requiring last-minute travel arrangements could trigger a series of financial difficulties if someone does not have savings to draw upon. Emergency savings are critical for financial stability, but many Americans do not have any. Recent studies show that many Americans would have trouble finding $400 or $500 in an emergency.

To address this, the Lab started out to test nearer-term strategies for encouraging residents to plan ahead and set aside savings. For most people, coming up with a large sum of money all at once is a daunting task. But by incrementally setting aside smaller amounts of savings, many residents can prepare for an emergency expense.

A key way to do so is by automatically depositing some amount of money from each paycheck into a savings account, in what is called “splitting-to-save.” To demonstrate the important role that employers who offer direct deposit can play in encouraging their employees to split-to-save, the Lab looked inward at the City of Boston.

Between June and October 2019, the Lab developed the Emergency Savings Fund Pilot in partnership with the Mayor’s Office of Financial Empowerment to test ways the City could increase the number of employees who split-to-save, starting with two departments: the Boston Public Libraries and the Boston Centers for Youth and Families. Through this pilot, City employees were encouraged to split a portion of their direct deposit into a designated savings account. They received small incentives for doing so, funded by a grant from the Rockefeller Foundation, which supports the work and mission of the Lab.

The pilot resulted in a 26 percent and 16 percent increase in the number of BCYF and BPL employees who split-to-save, respectively, with an average weekly contribution of more than $60 to a savings account. We partnered with Commonwealth, a local nonprofit, to evaluate the pilot and recommend ways of using what we learned to inform citywide practices to encourage all employees to split-to-save and bolster their emergency savings.

To read more about the pilot and its findings, check out Commonwealth’s report below:

Commonwealth report

Have questions? Please contact Katherine Swain Smith at katherine.swainsmith@boston.gov.