Savings can be many things: insurance against the unforeseen, a building block that enables mobility through avenues like education and homeownership, critical support for loved ones and/or protection for critical assets like homes, cars and retirement securities. The current economic and health crisis has underscored the clear need to have savings to navigate challenging times; yet many barriers--low and stagnant wages, consumer debt, discrimination and predation in financial services, and unresponsive products and services, to name a few--have long made it hard for low- to middle income households to accumulate savings over time. During the pandemic, with massive unemployment and under-employment and increasing consumer debt, this problem is getting worse.  

With generous support from Prudential Financial, Prosperity Now is continuing to explore how to remove barriers to saving and make savings more flexible to meet the needs of LMI households through products, policies, partnerships and non-profit programs. We need systemic change to make it easier for people to build savings and to be able to use savings flexibly to meet varied needs and goals, and all policymakers, regulators, product developers, non-profits, employers and other key stakeholders have a role to play. Below, we will discuss how we’ve explored flexible savings solutions and how we will continue to do so during the uncertainty of the COVID-19 crisis. 

Prosperity Now’s Exploration of Flexible Savings 

One part of the critical change equation--in addition to changes that address the underlying causes of economic inequality and insecurity--is the need for flexible savings solutions that more accurately reflect people’s financial lives.  Over the past two years, we have explored what LMI consumers want in savings solutions, what barriers keep them from building savings, and how the current landscape of savings solutions supports (and doesn’t support) the range of savings needs.  

Most recently, we released our report detailing our exploration of a savings product concept that would allow users to save for short-, medium- and long-term goals concurrently and move flexibly between different types of savings. Prosperity Now theorized that that such an “All-in-One” savings solution that meets now, soon and later savings needs through one product or experience would appeal to and better meet the needs of LMI consumers. To examine this theory, we developed a concept for an All-in-One solution, informed by research about LMI savings and refined it with practitioners at the 2018 Prosperity Summit. We tested interest in this concept by speaking with 62 low- to middle-income people at four sites (Lakewood, CA, a suburb of Los Angeles; St. Louis, MO; Atlanta, GA; the Bronx, NY). Through the interviews, we sought to learn more about interviewees’: 

• Savings situations, needs and the barriers that make saving and building savings challenging. 

• Interest in the All-in-One savings concept.  

• Interest and recommendations around specific concept features to facilitate savings. 

Broadly, the research found that LMI consumers are interested in an All-in-One savings product which would enable them to save for different goals with different time horizons concurrently. LMI consumers want more flexible savings, more guidance and support from savings solutions and more transparent financial products. We’ve also examined flexible savings solutions through the following activities:  

• Conducting a six-part landscape analysis of the state of savings solutions: The Savings Crisis and the Need for Holistic Solutions; a typology of Savings Solutions and how they support now, soon and later needs;  Savings Solution Features, which presents a typology of the features that different savings solutions use to support LMI savings; the Consumer Experience of Savings Solutions, which demonstrates how LMI consumers are currently interacting with savings solutions; Delivering Savings Solutions, which demonstrates why delivery partners are important for reaching LMI consumers and how products are currently being delivered; and finally, how partnerships can support this delivery.  

• Exploring federal policies that allow for savings for multiple purposes easily, such as the Saving for the Future Act, which would support employees in build both emergency and retirement savings.  

• Advancing savings solutions that protect assets, such as “sidecar” savings solutions that allow households to build emergency savings along with retirement savings, which we explored through an event on Capitol Hill last year, and Mortgage Reserve Accounts (MRAs), which we partnered with organizations on the ground to pilot. 

Supporting Savings During COVID 

This work remains salient as families struggle to manage their finances in the face of job losses, reduced hours and an uncertain financial future. Further, racial economic inequality, which put households of color at an immense savings and wealth disadvantage prior to the pandemic, is, tragically but unsurprisingly, contributing to disparate economic impacts in the current crisis.  Many households who have maintained employment and/or income, facing a recession and an ongoing pandemic, have been focused on saving for emergencies to prepare for the unexpected; others, pushed to the brink, have exhausted their savings and are struggling to attain financial stability. SaverLife, a fintech company that incentivizes savings to support users in building financial security, has been closely tracking the members’ financial status through the pandemic. Their findings, from a sample of 380,000 predominately LMI members, reflect this complex picture. Through June, people were saving more than in the corresponding period in 2019, yet credit card debt was up 84%.  

These diverse experiences of people in the pandemic, which vary depending on housing security, job and income security, health status and health care, whether they have children at home, and many other factors, underscore the need to approach savings carefully and in a very targeted manner to ensure the solutions are reaching people who need them. The situation also highlights the importance of flexible savings solutions that can better support people in managing their financial goals and needs during uncertain times. Over the next several months, we will work with key stakeholders toward targeted, responsive solutions that can support LMI households and help them meet their savings needs. We will be: 

• Transforming systems by encouraging financial institutions that are closest to LMI people (both physically and functionally) to adopt flexible savings solutions.   

• Advancing policies that will make savings easier for everyone, especially LMI households, through different vehicles, such as through service providers, employers and/or tax time.  

• Supporting non-profits to build and design impactful savings programs and, in turn, support LMI people to overcome barriers to savings.   

• Developing relationships and partnerships between financial institutions and LMI service providers to safely and impactfully deliver flexible savings solutions.  

We look forward to working with you to build a savings ecosystem that is flexible and meets the needs of LMI households.