Savings and loans

This week, Need to Know travels to rural Vermont, where local businesses had a common problem: many of their lower-wage workers were consistently late or absent. Most of these workers were being derailed by small financial crises: a broken-down car, medical bills, parenting demands. In response, dozens of employers, along with a branch of the local United Way, formed “Working Bridges” — a program that gives worker an immediate short-term loan — an “income advance” – no questions asked. The loans are then paid off through small paycheck deductions.

In this program, we visit employers implementing the program, who agree it has dramatically reduced employee turnover and increased productivity. It has also brought many workers financial stability for the first time; once loans are paid off, their payroll deductions are automatically diverted into savings accounts unless the employee chooses to end them — which most do not. Making saving the default option is a classic example of behavioral economics at work.

Explore:

Prescription for savings

In this Need to Know web extra, we meet the employees at Fletcher Allen Hospital in Burlington who have also taken advantage the “Working Bridges” program.

Save USA

Save USA is a program created by Mayor Michael Bloomberg and funded with federal, state, and private dollars. It’s designed to get low-income New Yorkers to put that tax refund in a savings account instead of spending it right away.

American Voices: Dan Ariely

Dan Ariely, professor of psychology and behavioral economics at Duke University, talks about why saving money is so difficult for many people and how simple changes in policy can make saving easier.

Payday Lending

Do payday loans take advantage of the poor? Or do they extend much-needed loans to consumers with no other access to credit?

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Comments

  • G.B.

    You all did a wonderful job explaining and representing Working Bridges in Vermont. I have worked for Rhino Foods for sixteen years and have had many opportunities to be proud of our company. This was another chance to note the quality of our company culture and the hope that others think more about how to make work a win-win for all involved.