Payroll Savings Plans

The Basic Idea:

Encourage families to have savings taken out of their paychecks – making saving easier and reducing the temptation to spend earnings right away.

How it works:

  • A business agrees to set up a voluntary payroll savings plan for its workers, withholding an agreed-upon amount from participating workers’ pay each pay period.
  • This is often an extension of an employer’s direct deposit program for payroll – splitting the funds into multiple accounts, including savings.
  • Some plans are linked to the purchase of US savings bonds – providing tax benefits to the saver and making casual withdrawal of funds less likely.
  • Funds are deposited directly into an account owned by the worker or transferred to the US Treasury to buy savings bonds.
  • A community group may offer companion educational programs in the workplace to encourage workers to save part of their paycheck.

Who Does It?

  • Often started by a community coalition that recruits local businesses to participate.
  • Businesses and other employers are at the core – anyone who employs people can do this.
  • Banks and credit unions often partner to administer the accounts.
  • Some banks offer a limited match of a worker’s first deposit (sometimes payable after a waiting period) to encourage people to sign up.


  • It is easy to set up.
  • It can be done virtually for free by using volunteers to discuss the idea with employers.
  • Once established, these programs largely run themselves.
  • Once a worker sets up an account, everything is automatic – this takes the ongoing decision-making and hassles out of saving.


  • Accounts are not exempt from asset tests so they may limit some families’ eligibility for benefit programs.
  • The families who could benefit from this program the most may be most reluctant to participate because they fear banks or worry about reducing their take-home pay.
  • It requires a constant “sales job” to enlist new workers at participating businesses.

Simplicity Index

  • Taking the Hassle out of Saving. Put simply, saving becomes much easier when individuals don’t have to think about it! Payroll savings plans allow for a seamless process and eliminate the need for continuous decision-making about when and how much to save.

Quilt It

  • Keep It – Making families aware of saving options is another way to help them keep what they’ve earned.

Examples and Resources

Treasury Direct, of the U.S. Department of the Treasury, Bureau of the Public Debt, allows employees to save money by investing in savings bonds through automatic payroll deductions. Company payroll systems offering voluntary direct deposit deductions allow employees the opportunity to have part of their pay transferred into their TreasuryDirect accounts to purchase electronic EE and I Bonds, Treasury bills, notes, bonds and inflation-protected securities (TIPS). Click here to learn more: 

America Saves encourages low- to moderate-income households to save money, reduce debt, and build wealth by offering free financial tools, savings services, advice, and resources. American Saves is a campaign managed by the Consumer Federation of America. Click here to visit their website:

RuFES is a project of the Annie E. Casey Foundation and the Aspen Institute Community Strategies Group.
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