Banking

Truist, Varo join effort to bolster Americans’ emergency savings

Truist Financial and the digital-only bank Varo have joined a philanthropic initiative from the asset management giant BlackRock aimed at helping Americans build more emergency savings.

The two companies are the first banks to sign onto the effort, which is working to build new and easier-to-use tools that will allow more people to establish financial safety nets.

“This is a structural and a systemic issue,” said Deborah Winshel, BlackRock’s global head of social impact and president of the BlackRock Foundation. “This is not an issue of getting people to want to save. It’s making savings easy, accessible, cost-effective and behaviorally compelling.”

More than a third of U.S. adults indicated they would have trouble easily paying for a $400 car repair or similar emergency, a recent Fed survey found.

Bloomberg

The initiative seeks to address the oft-cited finding that more than one-third of U.S. adults would have trouble easily paying for a $400 emergency.

In the Federal Reserve’s November 2020 household survey, 64% of adults said they would cover a $400 emergency expense with cash, savings or a credit card paid off in their next statement. Most other respondents said they would finance the charge, borrow from a friend or relative, sell something, or would not be able to pay the bill.

Charlotte, North Carolina-based Truist plans to launch a pilot program this summer, the details of which are still being determined, that will explore new incentives to promote savings habits.

“Rather than pay a promotion for just opening a deposit account, we are exploring the effectiveness of matching incentives to the right savings behavior” and giving people more chances to save repeatedly, Arijit Roy, the head of strategy at Truist’s retail community bank, said in an email.

Truist plans to roll out those tools more broadly based on what it learns from the pilot program.

Varo has “lots of potential ideas” that the digital-only bank will consider and evaluate as it works with the BlackRock initiative and its partner organizations, according to Varo spokesman Alexander Woie,

Varo’s work will build on savings tools that it already offers, including a Save Your Change tool and a Save Your Pay function that automatically deposits part of a person’s paycheck into their Varo savings accounts, Woie said. This year, Varo conducted a $100,000 giveaway where it gave winners $500 to build their emergency savings.

“Even modest savings can make all the difference when faced with unexpected expenses,” Woie said in an email.

The pandemic’s economic disruptions made everyone “much more aware of how close to the edge” many people live financially, said Timothy Flacke, executive director of Commonwealth, one of the groups that works with BlackRock on its savings initiative. Those challenges are particularly evident in communities of color, which is something that banks can consider as they look for ways to address racial inequities, Flacke said.

“Everybody should have the ability to build up a modest reserve of savings, and to access it when they need it and to use that as a first line of defense,” Flacke said, adding that he has seen “enormously important progress” since last year in elevating the concept of emergency savings.

BlackRock is talking to other banks about their ideas for bolstering customers’ emergency savings, according to Winshel, who said that the goal of the philanthropic initiative is to test ideas and then share the findings with as many organizations as possible.

Other companies that are participating include MasterCard, UPS, Best Buy and the employer partners Voya Financial and ADP.



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