The Power of the First $500: Microsavings and the Path to Financial Security

Let me start by being completely honest. I used to be a terrible Saver. I couldn’t save a dime until my employer enrolled me in a program that diverted money from my paycheck into savings and rewarded me with $50. After six months, I saved my first $500. Years later, I am still saving every month.

We now know that one in two Americans cannot access $500 to weather a financial emergency without going into debt. But we may not understand what this truly means to families in our communities.

For example, when I was Director of the San Francisco Office of Financial Empowerment, we began a project to help thousands of San Franciscans who had lost their driver’s licenses for non-payment of fines and penalties. Over 40% of those who lost their licenses also lost their jobs because they could no longer drive.

Just $500 in savings can prevent minor financial setbacks – like a traffic ticket – from becoming a major crisis.

Again, I witnessed the power of saving $500 through launching Kindergarten to College and helping thousands of families save their first $500 for their child’s college education. Research shows that saving $500 has a magnified effect – as much as 4x – on the likelihood that a child will make it to and through college. Just $500.

EARN’s fourteen years as a leader in microsavings has taught us that families first must learn to save for unexpected shocks or expenses, then they can move on to save for longer term goals, like retirement or buying a home.

Today, the EARN Starter Savings Program focuses on helping families across the United States experience the power of saving their first $500. Our ultimate goal is to turn a short-term savings strategy into a pathway to greater financial security. The EARN Starter Savings Program allows Savers to link their personal savings account at any of 6,000 financial institutions to EARN’s platform, track their progress, and earn rewards.

Early results are strong. EARN partnered with Wakeland Housing and Development Corporation in San Diego to pilot the Starter Savings Program with 60 affordable housing residents. More than three quarters of Savers consistently reached their monthly savings goal, and 76% of Savers were still saving six months later, long after they stopped receiving rewards.  You can read the case study to find out more.

EARN now has Savers in eight states, achieving the Power of the First $500. Together, we can make a difference. Will you join us? Learn more about how you can partner with EARN on our microsavings mission.

P.S. If you are interested in learning more about me and my passion for financial empowerment, please read my bio.