American workers were on a tightrope before the Covid pandemic, many surviving by the month, working full time—maybe more than one job, yet unable to save or get out of debt. The economic shutdown only heightened the daily anxiety, adding illness and sudden job loss to their concerns. Ronnie Washington founded Onward as a path towards financial security, starting by helping clients save for strained and uncertain times. We asked Ronnie how his work takes on new significance during the Covid crisis.
How did you get started working on financial security?
The problem was close to home. About 79 million Americans earn less than $20 per hour, often struggling paycheck to paycheck, without savings, and usually with debt—including members of my own family. A minor emergency becomes a huge catastrophe. For instance, one family member, who I’d call the hardest working person I know, worked six days a week, did everything right, yet car trouble threatened his livelihood and family. He resorted to a payday lender, agreeing to extremely high interest. He is not alone—this is a typical situation for 12 million recurring borrowers, paying up to 300% APR. I felt strongly that there must be an alternative product or service to build up an emergency fund, to offer financial education, and ultimately help people avoid high interest loans and pay advances.
How does Onward work?
Onward is meant to help every worker build a financial cushion. What the 401(k) is for retirement, Onward is for emergency savings. As in a retirement plan, employers facilitate automated payroll contributions to a personal emergency fund. Our clients pay close attention to expenses and are wary of debt. We offer them full control and flexibility. Next comes financial education—getting comfortable with how the financial system works. And last, access to an emergency loan through partnering banks and institutions. Maybe you haven’t saved enough yet, but you’re consistent, you’re engaging with the educational content provided. These loans are meant to help workers avoid payday lenders and the need to ask their employers for an advance.
The 401(k) reflects a social value: security in retirement. What value does Onward represent?
Just as financial security is a mindset, scarcity is also a mindset. People feel constant anxiety about not having enough, and this prevents them from preparing for the future. But saving that first $2000 is liberating. It is a first step away from scarcity towards security. It’s a transformation that requires trust.
Is this why Onward prefers working through employers rather than the world of consumer-finance apps?
The majority of Americans work for small and medium size businesses, and there is actually a lot of trust in those relationships. You get your paycheck from your employer, you get other benefits from your employer. When your employer endorses a service, or in particular this app, it’s permission to avoid the free-for-all of the finance app market and use a known tool. And we simply start with savings. As part of our response to the Covid-19 pandemic, we will be giving Onward free to small to medium sized businesses with essential employees. We want to give away 10,000 memberships to essential workers who work for small to medium sized businesses.
You’ve been building Onward since 2016. What has surprised you along the way?
First, the willingness of employers to support their workforce. Sure, labor relations can be tricky, but I think employers do care and want to help. Some contribute to employee accounts, others offer bonuses to savers. Employers often feel the impact of worker financial insecurity in their own business in ways that directly hit their bottom line. Next, I’ve been surprised by how much progress someone can make by just taking that first step. This is especially true if they can focus on making financial decisions without all the extra marketing of products and services. Keeping it simple, straightforward, and easily accessible have been key ingredients to kickstart better savings habits.
Covid-19 has brought even greater financial anxiety. How has it affected your thinking?
There’s more we can do. Supplying Onward to the American workforce is important. We want to expand our service by adding financial coaching services to make sure we can provide personalized help to people facing mounting debt, evictions, or medical and financial emergencies. People can negotiate with utility companies, hospitals, and other service providers, for example. So there is a lot of space to explore beyond payroll-linked savings.
What makes now a critical time?
The economy has essentially shut down. Thirty million people are suddenly out of work. Financial security should be one of the highest concerns for the nation. America is recognizing its essential workers and asking what people need not just today, but in the long term. Similar to a 401K savings plan, a tax-advantaged emergency savings fund makes sense, especially with employer or external contributions allowed. That tax advantage creates ubiquity and promotes adoption by workers and businesses alike.
The point is to never again allow our workforce to be in this position of financial peril. We assumed that we are secure and doing just fine, but that’s not the case. So I’m just hoping that this shock wakes us up and forces us to act.
Ronnie Washington is an Ashoka Fellow based in the Washington, D.C., area. You can read more about him and his work here.