All households need access to unrestricted funds to bridge short-term cash flow gaps, build a financial safety net, and reduce the need for high-cost credit. Weathering a financial emergency is particularly challenging for low-wage workers, many of whom lack access to savings plans or structures to enable them to begin saving or worry about high banking fees or the safety of savings deposits.

Last year, the New America Foundation and MDRC, with support from the Rockefeller Foundation and the Charles Stewart Mott Foundation, launched the AutoSave Pilot, a collaboration with employers to create voluntary savings mechanisms for low-wage workers that automatically divert, through payroll deduction, a small amount of an employee’s post-tax wages into a savings account.

A new ten-page paper, Automating Savings in the Workplace: Insights from the AutoSave Pilot, by the New American Foundation’s Alejandra Lopez-Fernandini and MDRC’s Caroline Schultz, offers some early lessons from the pilot. The AutoSave model — in which employers help facilitate automatic contributions to unrestricted savings, and employees are actively encouraged to sign up using a simplified enrollment process — is largely untested. Unlike most existing workplace saving programs, which focus on building retirement assets, AutoSave savings are intended to be fully liquid and available both to cover short-term needs and, potentially, to increase attachment to mainstream financial services or serve as building blocks to longer-term asset accumulation. In fall 2009, six employers began participating in the AutoSave pilot.

The paper by Lopez-Fernandini and Schultz begins with a short overview of the AutoSave concept; describes the initiative’s phased pilot approach; summarizes operational components, including the design elements informed by principles from behavioral economics; and concludes with early observations from the pilot’s launch and initial insights for policy development.