Young adults’ interest in accumulating savings—and their effort to do so—tumbled between September 2013 and September 2014, according to data from the federation’s America Saves campaign. During this period, interest in personal savings for young adults fell, from 77% to 68%, and the reported savings effort of these young adults also slipped, from 66% to 57%. Reported savings effectiveness for this group was also lower: 60% a year ago but only 57% last month.

“What we would like is for more people to split their pay to a savings type account to offset emergencies that consistently arise,” George Barany, director of financial education for America Saves, tells PLANSPONSOR. “Remember that our target population is primarily, but not exclusively, low- and moderate-income wage earners.” He cites a 2011 Harris Poll showing that 85% of the country’s workforce uses direct deposit, with just 22% putting some of their pay into a non-retirement account. The majority of that 22% find this to be a most effective way to save, and a very effective way to save for emergencies, Barany says.

Learning How to Save

The population of workers younger than 35 is of particular interest and concern, according to Barany, since they tend not to save for either retirement or short-term needs. “It has also been shown that if a younger worker is able to save for regular expense and emergencies they are more likely to take the next step and save for retirement,” he observes.

“From conversations I’ve had with HR there really is not much emphasis on short-term savings in orientations for new hires,” Barany says, adding that  the emphasis on retirement savings, which in turn is just one piece of an overall menu of topics to go through with a new employee.

“Plan sponsors could encourage saving a small amount out of each pay to meet those emergencies that regularly crop up, such as car repairs and medical copays,” Barany suggests. This could offset borrowing from [a retirement] plan to meet those expenses. Research has also shown that employees are stressed about their finances and tend to deal with personal financial matters while at work that can affect a company’s bottom line, he says. “A financially stable workforce can be a more productive work force.”

One way to increase overall workplace saving is to provide a way to save at work for young adults, which America Saves has been promoting for the last three summers among a large and vulnerable population: young first-time summer workers from low-income households.

“These young people are inexperienced about personal finance and are less likely to save any of their earnings,” says Barany. “We’re setting them up with the same system millions of adults use to save. Why not give them the same opportunities to save money that we have?”

The program encourages young employees to save a portion of their paycheck through direct deposit by identifying a savings goal, committing to save a portion of their paycheck toward that goal and setting up direct deposit into an existing or new account. The program is not looking to divert funds already committed to retirement, Barany emphasizes.

Bottom line, Barany says, is that someone is much likelier to save for retirement if they can meet their monthly needs so they don’t borrow from the 401(k) plan. “We’re promoting the idea of saving regularly out of a paycheck: You have to start somewhere,” he says. “One thing we hear is, ‘I can’t save. I can’t afford to save.’ Get them to save. They have to start somewhere.” It is essential for those who don’t have a great deal of experience  saving to gain that level of confidence that will let them save for retirement.”

The Personal Savings Index is based on a survey of more than 1,000 representative adult Americans. The index is the first national effort to track, from the saver’s perspective, American’s attitudes towards saving and savings goals.

More information is at the Consumer Federation of America’s website.