Business Podcast Post

Financial Emergencies with Rachel Schneider

George Grombacher December 8, 2022

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Financial Emergencies with Rachel Schneider

LifeBlood: We talked about what companies can do to help their employees handle financial emergencies, the tax implications and process for doing it correctly, and how to get started, with Rachel Schneider, Founder and CEO of Canary, a company facilitating employee assistance grants.

Listen to learn how to position your employees for success when emergencies happen!

You can learn more about Rachel at and LinkedIn.

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Our Guests

George Grombacher


Rachel Schneider

Episode Transcript

george grombacher 0:00
Hi this is George G. And the time is right to welcome today’s guest strong and powerful Rachel Schneider. Rachel, are you ready to do this?

Unknown Speaker 0:21
I certainly am. All right, let’s

george grombacher 0:23
go. Rachel is the founder and CEO of Canary, their company facilitating employee assistance grants through financial health packages. Rachel, I’m excited to have you on tell us a little about your personal lives more about your work and why you do what you do.

Unknown Speaker 0:39
I’m happy to so yeah, so I live in New York City with my husband and two kids. That’s the personal life, teenagers, super fun. And I’ve spent the majority of my professional life thinking about the financial well being of American workers. So I wrote a book called The Financial diaries, which was a partnership between me and a professor at NYU. And we worked with about 235 families across the US. And they were they were in every version of American life, you can picture right some folks in cities, some folks in rural areas, and people in suburbs, immigrants, people who’ve lived here for generations. And the goal of the research was to work with them for a full year, and understand their financial lives for a full year. So we sat in people’s living rooms and kitchens and met at local McDonald’s and just talked about what has happened in your financial life over the last few weeks, and did that over and over throughout the year, and tried to track every dollar that went in and out of the house. And so it was really an extraordinary deep dive into, like, what is our financial life look like? And the folks we were working with were mostly from the median income in their neighborhood to down to the poverty line. So nobody who was below poverty and living on government assistance, everybody was essentially a working population that was still struggling, which is now a lot of our country.

george grombacher 2:13
What a project.

Unknown Speaker 2:15
Yeah, it was great. It was really, really good. And so it gave me this deep grounding in how are people’s financial lives really working? And of course, there’s some big gaps. And so out of that, I decided to start my current company Canary, which, as you said, works with employers to facilitate emergency funds.

george grombacher 2:36
So the problems are, we don’t have enough money, we’re not interacting with it optimally, a little bit of everything.

Unknown Speaker 2:44
Yeah, it is really, I mean, both of those. So you know, even before, so right now, we’re all talking about inflation all the time and in economic circles. But even before this last, this current bout of significant inflation, the cost of living has gone up faster than real wages for several decades. So and that, and what’s really remarkable about how that plays out in the US is that the cost of consumer goods has not gone up in the same way, right. So you have plenty of people who can afford a flat screen TV, but can’t afford to buy a house. And that’s not because they’re spending poorly or making bad choices. It’s because the cost of housing has gone up really fast, and the cost of education has gone up and the cost of medical care has gone up. All those things have gone up faster, and more significantly than the cost of your basic consumer lifestyle. And so we have a dynamic in our country where it looks like people are living large, but they can’t afford the things that are most important to them. The other thing that is going on that was really hidden that we looked at a lot of our research was how volatile people’s financial lives are. So in like traditional economic models, and obviously this comes up a lot in how we advise people in their financial lives. We picture life as the lifecycle. Right? So you what you picture is start out going to school, you gain, education skills, the things you’ll need for life later, then you get your first job. And over time you get promoted, you earn more and more and more. And over that period of time, you’re supposed to save more and more and more, buy house, save retirement, then you retire and you’re in less. And so we picture this like really pleasant, nice arc. But the reality is that a lot of people don’t live on that arc. What they live on is more like this sort of scraggly bumpy up and down where In an average year this is pre pandemic research. So in an average year, in the early part of the century, the first 15 years of age But if people like 25% of the country had a big income swing from this year to love to last year, and by big, I mean like more than 25%. So people go up and down much more than we thought. And they go up and down much more than we thought with any year. So that’s a lot about what our research was about that we saw, like, plenty of people work hourly, or they work, a steady job, but get paid in a volume based way or they have a steady job, but they also have a part time job that’s more precarious. And so people’s earnings really swings wildly, wildly from one month to the next. And so the kind of planning advice you give when you live on life cycle arc, which you know, to be honest, I live on, like lots of people that do live on, that’s a real economic model, if that’s how your life is working, the most important financial advice is spend less today to save for tomorrow, slow and steady. Doesn’t matter, like just slow and steady, save a little bit all the time. If you don’t live on a lifecycle arc, and you live more on this, like scraggly Up and Down Spike and dip kind of bottle, well, then what really matters is are you saving for next week, and spending when you get to next week, and then saving again next week, the week after that, and spending again after that, like it’s much less about the long term and much more about the near term. And not all of our financial advice is caught up to that. And certainly not all of our financial policies, right. So we subsidize saving for retirement by getting a tax break, we subsidize buying a house by getting a tax break. We don’t do anything for emergency savings. As a society. You know, or, and the work my company does, it’s related to that is that employers often provide benefits that help you save for retirement, or that help you deal with large medical events. But they don’t always do things to help you with, hey, next week, I’m not going to be able to make rent. And so the emergency funds we’ve managed are really about that they’re about we as a company are going to set aside money. And if we have an employee who, you know, lives in the path of a hurricane has a house fire has something catastrophic happened in their life, which means they’re not going to be able to be okay without help, we will just help them, we will just give them more money if you think of it as like a non taxable hardship based bonus. And we think that’s a really important thing for companies to start engaging in because they we all have to embrace that the way we’re going to manage this volatility that people live through is by helping each other.

george grombacher 7:49
I love it fascinating to think about the traditional arc, but just on a weekly basis. So you know, exactly what

Unknown Speaker 7:59
our monthly or like, right, right? And I’m sure, yeah, this is, I don’t know, issues that are core to how you think about the world. Like it’s not that retirement savings isn’t important. It’s super important. It’s just that if you live in that frag, the way you’re going to routinely eat away at your for your 401 K by taking out a loan or a drawing early, because something actually really urgent has happened like this week.

george grombacher 8:24
Yeah, yeah, it’s this ultimate theory versus practice kind of thing all looks good on paper. But here I am living my life in the real world. And I have needs that are constantly coming up. And my income fluctuates to your point. So in the solution to that, for employers, we can go ahead and not address it and then watch our employees, probably many of them struggle when needs come up as they do. Or we can proactively say, Okay, this is a problem. How can we address this? And this is the space that that you are that you are meeting the need?

Unknown Speaker 9:04
Yeah, exactly, exactly. What we hear from employers is things are things like, you know, when I have an employee who’s struggling like this, this is the case for anybody who’s ever managed people. If you’ve managed people, then you’ve had somebody who has a crisis. And when they have a crisis, they don’t show up, or they’re late, or they show up, but they’re highly distracted. And in a lot of jobs, that just doesn’t work, right. We’re a service economy. And so most people have to show up to their work and like really be present. And and so what we hear from employers is, look, I had this really great employee, and then she hit this bump in the road in her own life, lost her car. Now she’s taking Uber to get to work, which is too expensive. So I know that it’s not going to work for her. Right. I know what she makes that’s not going to work in the meantime or productivity is dropped. So my whole team’s pissed right now. and it would be so much better if I could just help her get a new car, versus it’s going to cost me a lot of time and money to replace her. And I’m going to feel really bad about. And what employers say is like, so sometimes when that happens, an employee will come to them and ask for help. Or they’ll know that, that an employee has a GoFundMe, right? And how do you interact with that as a Deployer? Like, it’s, it’s so you don’t want to say no, you don’t want to ignore the GoFundMe, you also can’t necessarily say yes, you know that. There’s a really big danger of unequal treatment across your workforce. If you say yes, because somebody’s probably struggling and not saying so somebody’s probably struggling, you just hasn’t made it to your awareness. So it’s a really tough thing for an employer, you want to be kind and helpful. You can’t take on responsibility for the totality of your employees financial life. So where do you draw the line? Right. And so that’s why working with a third party makes sense. But that these are hard questions for employers to figure out. The reality is that a lot of businesses have thin enough margins that it’s not, it’s not as easy as it sounds, to just say, well, we’ll just raise wages. You know, that that might be true in some industries, but you’re talking about your average, you know, 100 person company, 200 person company, like some of our clients are folks like home health care companies, they can’t just really can’t just raise rates on their clients necessarily. Or, you know, and none of us want prices to go up. So like the idea that, well, we’ll just raise wages, well, then we are going to see prices go up. So it’s tricky. I wish I could say understood Becker macroeconomics better, but I don’t, mostly I know that the job that we all have is to try and show up for each other, and employers, employee communities are really important ones for us to show up for each other financially.

george grombacher 12:04
Yeah, I think it’s a big, it’s a huge opportunity. And that community aspect that every company theoretically has, and does one way or another, to do good. And that’s really, really across the board in nearly every aspect of life and wellness. And certainly, when it comes to financial emergencies, there’s a big opportunity, so why not do that. And then the role of a third party makes a ton of sense for the reasons that you just laid out. So I think that there’s most certainly a business case for this and, and a very human case for it. So how does it actually work?

Unknown Speaker 12:38
So what we do is we partner with employers, so what this is also just not well understood, but there are some IRS rules that mean that if you as a company have an employee who is experiencing hardship, so first of all, if if employees are affected by natural disaster, you can simply give people extra pay, and it’s not taxable income, which is really not widely understood. You also can work with a charitable organization, and donate money to a charity. And then that charity can donate money to your employees. And so essentially, that’s what canary is doing. We have an nonprofit that we work with, who and so the funds flow, what we’re doing is that the companies that we work with, donate money to that nonprofit, called Canary impact lab. And so Canary impact lab takes in charitable donations. And so a company can both contribute themselves out of their p&l, or they can do fundraising drives amongst their employees. And we see companies doing some of both. And then that nonprofit, essentially sets up eligibility criteria. If people experience a hardship, they can come and request funds. And my company Canary, I established both the nonprofit and the for profit, the for profit essentially works to facilitate all of that and make it possible. So you could think of us like the 401k administrator, right, we make sure all the rules are met, we have an application process people go through to demonstrate that they are in fact experiencing an eligible hardship. We do all the customer service back and forth to make sure that we have the appropriate documentation for the IRS, we make sure that the payment goes through. And we provide a lot of data back to the employer at an aggregate level, anonymized so that they understand what kinds of crises their employees are experiencing. And so you could think of this like, I really think that this model of providing emergency help for employees is going to be as ubiquitous as a 401k. But in order for it to be that you need third party administrators just like you have in the 401k world, because the rules that you have to be following. And the other reason to have a third party is that it really protects the anonymity and the dignity of the person applying and takes this kind of hareidi. Who do I say yes to Who do I say no to Job off of the HR leader, or off of the CEO, or off of whoever would be playing that role. So there’s really benefits for both sides to outsource this to a third party. But and so, you know, the basic activity that we’re doing as a company is working with companies to determine like, How much money should you set aside? What kinds of crises? Are you supporting your employees when they experience and then working with employees when they experienced a crisis to make sure that they can apply effectively and receive their funds?

george grombacher 15:47
What is the response better? What’s the pushback, then? I’m curious on both.

Unknown Speaker 15:51
Yeah, it’s really interesting that both of those are good questions. So what’s one thing that’s interesting to know about this is that large companies have this in place already. Walmart, Home Depot, Starbucks, Wells Fargo, I could go on and on, like, like many of the brand names, you know, have a program like this in place, because they’ve been, they’ve known about the tax rules that enable this for 20 years, and it’s become an increasing norm on run fortune 100 companies. So the reason we launched is that it’s just much less known under among smaller companies, and much harder to implement, because you don’t have the resources to put against it. Right. Home Depot has been doing this. Some of the longest of some companies, and they have a lovely team of 10 people who manage this. But if you’re 1000 person company, that’s much harder. So. So the pushback that we get is, is well, first of all, people just don’t know, this is a thing. The second thing people say, Well, why don’t you just pay people more? To which our answers yeah, that’s, that is part of the answer, always, like we would have higher financial security for lots of people if they earned more money. And even when people earn a living wage, they still are gonna have crazy things that show up. And, and so the basic need to help each other doesn’t go away, it just lessons. And we think that’s a great idea, raise your wages, improve your benefits, use the emergency fund as a last resort, you still want it because people need a last resort. So that’s one of the objections, people worry that it’ll cost too much to do. Right. So employers think, well, that sounds like a good idea. But what if it’s, what if every person in my company comes and asks for help? Right? What if 30% of people might company? Right, like, That’s terrifying. Like, just from a budget perspective, it’s scary also, like, it would be disconcerting, to say the least, right? So we reassure people, what we see, we just don’t see that happen. What you see is that when you say to people, there’s an emergency fund available, people are very slow to raise their hand, we see usage in the low single digits, you know, 3%, of a company 1% of a company, if you promote it really widely, and like really strongly encourage people to use it, you’ll start seeing usage. And higher than that, but people really pride themselves on being able to take care of their own life. And so we really don’t, so people worry that too many people will apply, or they worry that there will be fraud. Our systems are set up in order to be able to see it if there was fraud, but you just don’t see it at material levels. Like we’ll catch it if somebody’s lying to us, but but people get the idea that this is a shared pool, and that if I take the money, somebody else can’t get it. I actually worked on a program once related to the where we were, you know, in the, in the run up to starting Canarios working on a program where we gave up funds during the pandemic. And we actually had somebody give the funds back, because they were experiencing an emergency. And then they got access to other resources, like they found other help somewhere else. And now they felt like they weren’t the most needy, they actually sent a check back. Like people, people are better than we give them credit for.

george grombacher 19:23
I definitely agree with that. does vary from company to company? How how much you found the pool with and then do you put a cap on what the amount to be distributed as?

Unknown Speaker 19:37
Yeah, so a key there are a few things that get customized company by company. One is what is the total? What is the maximum grant size that’s available to any one person? The other is how often can people apply? So sometimes you’ll set a lifetime limit. Sometimes people say you can apply once every three years. Right? Something like that. He’s also sometimes set eligibility rules around like this is, this is for employees who’ve worked here six months or longer, or employees who earn under a certain amount or or less, although we really encourage people to think broadly, like, just make everybody eligible people don’t apply unless they need the money like you don’t, your CEO is not going to buy, like your CFO is not going to apply. It’s going to be your entry level service level workers who are going to apply, or people who’ve just experienced something catastrophic. But we work with, but employers can, it is important to think about what is your maximum grant? Because that’s our best lever to make sure that usage comports well with the budget of the company.

george grombacher 20:52
Makes a lot of sense. Yeah. Love it. Well, Rachel, thank you so much for coming on. Where can people learn more about you? And for companies that are interested? How do they engage with Canary?

Unknown Speaker 21:01
Yeah, so our website is www dot work with Canary, I’m super easy to find, because my email is Rachel at work with And I’m on LinkedIn. And that’s really the best place to reach us is really by email so or our website, but I would love to be in touch with folks who are interested in doing this, it just under are and also people who are just interested in curious about the idea, like we’re seeing lots and more lots and lots of cash interest in sort of this emergency relief, mutual aid. So I like being part of this community. So if people want to talk about that general idea, reach out. And if you think this could be useful for your company, of course, reach out,

george grombacher 21:42
love it. If you enjoyed as much as I did, show Rachel your appreciation and share today’s show with a friend who also appreciates good ideas go to work with That’s worked with ca Just in case you haven’t spelt canary in a while, which certainly may. And figure out if this is a good fit for your organization, or if you’re an employee at a company, pass it along to the leadership and figure out if you can bring this really, really important and valuable benefits to help everybody when needs arise, which they certainly do. Thanks again, Rachel. Thank you so much, George. And until next time, remember, do your part by doing your best

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