US-EN Advisors

Emergency savings: Planning for the unplannable

Episode 117: Peter Welsh joins the podcast to discuss the importance of having a dedicated plan in place for dealing with unexpected expenses.
February 2021
 

The COVID-19 crisis exposed an already dire problem – families could not come up with money for unexpected expenses, such as replacing a flat tire or repairing a busted pipe. As such, many advisors have been reemphasizing the importance of optionality and financial wellness to help their clients and communities properly prepare for these unpredictable emergencies.

Peter Welsh joins the podcast to discuss the importance of having a dedicated plan in place for dealing with unexpected expenses. Plus, he also discusses how his team has developed an after-tax emergency savings plan that starts in the workplace through paycheck deduction.

In this episode: 

  • The evolution of emergency savings
  • Is there a “right” amount to have set aside in case of emergencies?
  • Why it’s important for financial advisors to step up and step in
  • How employers can offer an emergency savings program as a benefit of employment

Transcript

Peter Welsh: The best thing I can give to any client is a good night’s sleep. That’s what we all want at the end of the day. And if you could give an employee the ability to have a peaceful night’s sleep by not having to worry about the unexpected emergency, I think you’ve done a tremendous, tremendous good. And that employee is going to remember that as well.

Ben Jones: Welcome to Better Conversations, Better Outcomes, presented by BMO Global Asset Management. I’m Ben Jones.
Emily Larsen: And I’m Emily Larsen. On this show, we explore the world of wealth advising from every angle, providing actionable ideas designed to improve outcomes for advisors and their clients.
Disclosure: The views expressed here are those of the participants and not those of BMO Global Asset Management, its affiliates or subsidiaries.
Ben Jones: In 2019, the Federal Reserve Board did a study of economic wellbeing in the US. What they found was that nearly 40% of individuals wouldn’t be able to easily come up with just $400 for an unexpected expense. Now that’s a lot of people who might not be able to replace a tire or repair a busted pipe.

Emily Larsen: The gravity of the situation became more clear last year, as the COVID-19 crisis devastated many families’ finances across the country. As a result, we’ve seen many advisors reemphasizing the importance of optionality and financial wellness to help their clients and communities properly prepare for unpredictable emergencies.

Ben Jones: Today, I’m joined by Peter Welsh, Senior Vice President and head of Retirement Services at Millennial Trust Company. Pete and the good folks at Millennium Trust are also taking action to prepare people for the unexpected, with the creation of a leading-edge wellness offering. Now, by applying many of the learnings from employer-sponsored retirement plans, they’ve developed an after-tax emergency savings plan that starts in the workplace through paycheck deduction. Now, before we discuss the specifics of how this type of plan might work in the workplace and how it can change behavior for the better, I want to start with the basics from Peter’s perspective about the concept of emergency savings and how that’s evolved over time. It’s interesting because I remember as a child, the emergency savings money was more of a form of mental accounting. In fact, I think my parents had like an envelope with their emergency savings in it. But today there’s actually designated accounts that have come to be. Tell me. Why do you think that that evolution has occurred?

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