‘It can be very powerful’: Most Americans can’t afford a $400 emergency, dissolving dreams of retirement. Here’s what employers are doing to fix that

Amber Comber, a single mom in Charlotte, North Carolina, found herself in this position after buying a house. Shortly afterward, her fridge broke down and then her car. Although she had some savings, she was forced to dip into her 401(k) account to cover the rest.

“I just wanted to have an emergency buffer,” Comber told USA Today.

Only 63% of Americans say they could cover a $400 emergency expense using cash or its equivalent. There might be a workaround, though. Workplace emergency savings accounts (ESAs) might make it easier to save.

“Allowing people to set it and forget it can be very powerful,” Claire Chamberlain, president of The BlackRock Foundation, told USA Today.

How a workplace savings account could help

While 30% of Americans have some emergency savings, they don’t have enough to cover three months’ worth of expenses, according to Bankrate’s 2026 Annual Emergency Savings Report. And almost one in four have no emergency savings.

They’re saving less for a few reasons. Over half say it’s because of inflation and the rising cost of living, while a little over a quarter point to unemployment or a change in income. In an emergency, 17% would cover those costs with a credit card, 12% would borrow from family or friends and 3% would take out a personal loan.

Or, like Comber, they might dip into their 401(k) for emergencies, a move that’s generally discouraged by financial experts. Not only does it jeopardize your long-term financial security, but it triggers a 10% early withdrawal fee, unless you’re 59.5 or older, and income taxes.

Yet, hardship withdrawals are increasing, with 6% of plan participants taking at least one in 2025, according to Vanguard.

That’s where a workplace emergency savings account could help. Like a 401(k), a portion of your paycheck is diverted into the ESA, so over time, you have a cash cushion for emergencies. Unlike a 401(k), those funds are accessible in the event of an emergency, so you don’t have to hit up your retirement savings or loans that push you further into debt.

The Emergency Savings Initiative (ESI) was created in 2019, funded by The BlackRock Foundation, the asset management firm’s philanthropic arm, and run by Commonwealth. While BlackRock helps Americans build long-term wealth if they’re struggling paycheck to paycheck, “it’s tone deaf to talk about 30 and 40 years out,” Chamberlain told USA Today.

ESI collaborates with employers, payroll providers and financial institutions to embed emergency savings tools into workplace systems. Since its launch, ESI has rolled out more than 60 projects in companies like The Fresh Market, Starbucks and GXO.

The ESI Impact Report found that, of those who opened an ESA, 28% made a withdrawal — helping to “preserve up to $38 million in retirement assets by reducing early withdrawals.”

While some employers offer standalone ESAs, some offer pension-linked emergency savings accounts (PLESAs). Created by the SECURE 2.0 Act of 2022, these are tied to employer-sponsored retirement plans such as 401(k)s and 403(b)s.

Workplace plans vs other options

By making automatic deductions from your paycheck, an ESA or PLESA removes the temptation to spend that money on something else. This could be an ideal solution for those who struggle to save (or to save consistently).

Some programs have monthly caps, transaction limits or other employer rules. Workplace emergency savings accounts aren’t tax-advantaged like many retirement savings plans.

For example, if you worry about emergency healthcare expenses, you may consider a health savings account (HSA), which is a tax-advantaged account available to people enrolled in a high-deductible health plan (HDHP).

With an HSA, contributions are made pre-tax, while earnings and withdrawals (for qualified medical expenses) are tax-free. You can roll over unused balances each year, so it also serves as a long-term savings vehicle.

If you don’t have access to an employer savings account or PLESA, you might want to consider opening a high-yield savings account (HYSA) for emergency savings.