Things are looking 'very frightening' for working families in the U.S.: SaverLife CEO

SaverLife CEO Leigh Phillips joins the On the Move panel to discuss saving plans amid COVID-19.

Video Transcript

ADAM SHAPIRO: Welcome back to Yahoo Finance On the Move. A lot of people talking about a need for all of us to save, save for the future, save for emergencies, save for retirement. But who offers the incentives other than you need to do it?

Well, SaverLife. Leigh Phillips is SaverLife CEO, which is also a partner of the Funding Our Future campaign, a group that we feature each week only on Yahoo Finance who advocate for a secure retirement for all Americans. And Leigh Phillips is joining us from San Francisco to tell us more about how SaverLife incentivizes people to save. It's an app, and you link it-- if I were to sign up with this, you'd link it to my bank account, and then what?

LEIGH PHILLIPS: So SaverLife is focused on helping the millions of Americans who struggle to save to build that habit of saving. And we do that by using technology to make saving rewarding, engaging, and fun. So anyone can join SaverLife. You just have to be over age 18 and here in the US with an email address. And if you want to earn rewards and prizes for saving your own money in your own bank account, yeah, you'd link your account to SaverLife, and we have a whole range of different prizes and challenges that reward people for taking different positive financial actions.

ADAM SHAPIRO: And what-- well, give me a sense in the real world how it works. Are you tracking if I put like $5, $10, $20 into a savings account, I then get some kind of coupon?

LEIGH PHILLIPS: You actually get the chance to play games to win prizes. So what we do is focus on savings habits. So we know even pre-pandemic, many Americans struggled with savings. You know, we have 40% of us didn't have $400 in the bank to cover a financial emergency. We also know a lot of our clients have very inconsistent income, so it can be very hard to do some of the things that, you know, maybe you or I would do you, like set up auto savings or put a certain amount of money away every week.

So what we focus on is starting small so that people can build up that saving habit. So you save a minimum of $5 a week, and you can win a online electronic scratch card, and then you can play that to win cash prizes. We also do different savings challenges, so time bound savings, so save $100 or $500 within a time frame. We have prizes for encouraging people to save their tax refunds. So all sorts of different things that we do throughout the year.

MELODY HAHM: Leigh, it's been a fascinating time trying to cobble together where people are using their stimulus checks. I know a bunch of academic researchers actually tapped you guys, and you studied 6,000 people and their behavior when it came to that initial stimulus check and how much they saved and how much they spent. And we've heard from a flurry of companies, right, that said, hey, perhaps the next quarter, we won't do so well because they've already spent all of their checks. Can you give us a forecast right now of where those folks may be saving or spending? Do you feel as though the economic insecurity and the financial instability will continue, especially because we don't have another deal on the table right now?

LEIGH PHILLIPS: Absolutely. I think things are looking very frightening for working families in the US right now. So amongst our SaverLife members, the majority of whom are women, average income is around $25,000 a year. About 80-plus percent, almost 90%, are reporting that they've lost hours at work or lost their income completely.

So when the pandemic first hit around kind of the March time frame, a lot of people had just gotten a bit of a boost because it was tax refund season, right, so people had gotten that earned income tax credit, that tax refund in the bank. Then we saw a bit of a gap, and people lost their jobs very suddenly, right, like one day we're at work, the next day we were at home. And for the 40-plus percent of our members who cannot work remotely, that's been a really big financial shock.

So then there was a gap, of course, between when that happened and when stimulus kicked in. And so we and other nonprofits have been trying to bridge that gap by giving out cash disbursements to people, a little bit of cash assistance to help tide people over. So what we saw in April and the study that was conducted by Columbia Business School using SaverLife data really kind of showed this kind of split picture.

So we had some people, about half of them, spent the money within two weeks. And to be clear about what people are spending that money on, it's not frivolous things. We're talking about rent. We're talking about food. In some cases, supportive technology equipment so kids can learn at home. So really basic essential things that people need.

On the other side, we saw people who maybe were a little bit more financially stable or still have income preparing for a very uncertain future. So in April, we actually saw significant spikes in-- in two areas, one is in saving, and then the other is in spending, particularly on groceries. So we saw a huge uptick in spending.

Over the coming months-- or the last few months, we actually have seen savings balances steadily declining and deposits into savings steadily declining. We haven't looked at the data yet for August. But of course, that's when people have fallen off that very significant financial cliff when the expanded unemployment benefits ended at the end of June-- July. I'm sorry. And it's also important to note that our membership are actually reporting an increased number of people being laid off and losing their hours at work. That number is not going down.

RICK NEWMAN: Hey, Leigh. Rick Newman here. So you're talking about trying to motivate people to save, and you said the average income of your participants is only around $25,000, $26,000. That's not much. So do you find that most people actually do have some extra money they could save if only they had the right mindset or the right discipline? Or do people actually have to give stuff up in order to put this money into savings?

LEIGH PHILLIPS: Well, you know, Rick, I would say if you're living on a $25,000 to $35,000 income in the US, particularly in higher-cost areas like where we are here in the Bay Area, your money management skills are actually pretty good, right, if you're able to make ends meet on such a limited income. What we see with our clients is a lot of volatility. So people's paychecks aren't always consistent. They don't get the same hours at work every two weeks the way that maybe some of us do.

So we built SaverLife to try and be responsive to people's real-life experiences, which often see a mismatch between income and expenses. So people are remarkable. They're remarkably resilient. They know that they want to save. Most of our members, about 80-plus percent of our members, are parents, mostly mothers, and they're very focused on having a better future for their kids and making those sacrifices and those investments.

So we encourage people to save as much as they can and to save when they can. For some people that may be every week, or every two weeks, every paycheck. And others it may be in certain times of the year when incomes are higher or certain periods of time, for example, tax season when you're getting a little bit of extra money.

ADAM SHAPIRO: Leigh Phillips is the SaverLife CEO and also a partner of the Funding Our Future campaign. We appreciate your being here On the Move.

LEIGH PHILLIPS: Thanks so much for having me.