Jack Wroldsen (California Polytechnic State University), Emergency Electronic Savings Accounts in a Post-COVID World, 52 Seton Hall L. Rev. 507 (2021):

The shutdowns stemming from COVID-19 revealed the need for emergency cash savings, especially for unbanked and low- to middle-income people. As COVID-19 emerged, the US turned to impromptu solutions like government stimulus payments and expanded unemployment benefits. But those solutions were only available because a large-scale emergency galvanized political support around immediate aid. The stop-gap measures suggest the need for a transformational and long-term strategy for people to be more prepared for emergencies, as most emergencies in life are not nationwide events, but personal shocks where government rescue packages are not available.

This Article proposes the creation of tax-favored Emergency Electronic Savings Accounts (“EESAs”) to address two concerns.

First, EESAs should be designed to help low- to middle-income people save for future emergencies. The tax code incentivizes savings for other anticipated life expenses, such as retirement and medical expenses. But many middle- to low-income people do not have retirement accounts in the first place. And for those who do, raiding a retirement account is a perverse way to survive an economic emergency, for it sacrifices the future to endure the present. Additionally, medical savings accounts are too limited because emergencies are not confined to healthcare expenses. Furthermore, this Article proposes that EESAs should include refundable tax credits paid electronically as matching savings funds deposited directly into EESAs, like employers’ matching investments deposited directly into employees’ 401(k) accounts.

Addressing an additional concern, EESAs should be designed to help unbanked people establish online bank accounts. By not having a bank account, unbanked people lose out on lower-cost and more-efficient financial products and, instead, often resort to payday lenders that charge exorbitant interest rates. Capitalizing on innovations in scalable financial technologies that make free online accounts with no minimum balance requirements (such as PayPal and Venmo) easier to access than ever before, EESAs should usher unbanked people into free or low-cost online banking relationships. An added benefit of establishing electronic EESAs is that they can serve as a bridge to, or integrate seamlessly into, the future development of a central bank digital currency (“CBDC”).