Why lifestyle savings accounts are an increasingly popular benefit

As the cost of living continues to outpace wages, employers are scrambling to build financial wellness benefits that actually benefit their employees' pockets. Are lifestyle saving accounts the answer?

A lifestyle saving account, or LSA, is a set of funds employers provide their employees for just about any caregiving, wellness or work-related need. While LSAs do have the same tax benefits as other savings accounts (LSAs are taxable income), this benefit essentially acts as a catch-all for employees' wide range of financial needs — and they're growing in popularity. According to benefits and advisory firm WTW, just 7% of employers currently have LSAs in their benefits package, but 38% of employers either plan to offer LSAs by 2025 or are considering it.

"This account allows you as the employee to choose what type of expenses best meet your needs, and employers have the flexibility to determine the benefit level," says Sara Taylor, senior director of employee spending accounts at WTW. "The flexibility and personalization of this benefit is what's so attractive."

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Notably, when WTW asked employers why they offer or are thinking about offering LSAs, over two-thirds of respondents said to personalize their benefits, while 59% said to attract and retain talent. Taylor points out that employers are becoming increasingly overwhelmed by just how many different benefits are out there. In a generationally diverse workforce, it's especially hard to help everyone, she notes. Some employees need student loan assistance, others need caregiving funds and older workers are typically trying to throw more of their wages into retirement accounts. LSAs could help employers consolidate several employee needs into one benefit. 

"Employers over the years have been adding lots of benefits programs, and historically, some of those programs get very little usage by their employee base," says Taylor. "LSAs could provide a richer experience for employees versus the laundry list where pieces or parts of those programs appeal to a certain population but not a full [workforce]." 

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Taylor predicts LSAs will only become more common as employers work to address the diverse financial needs of their workforce, but that doesn't mean LSAs are foolproof. Taylor advises employers to first consider what benefits the LSA would replace, and if that consolidation would truly help employers offer their workers more money for more needs. From there, employers should make it clear why they're offering LSAs, highlighting just how many expenses employees can use their new benefit on. 

"I'm a firm believer of communicating why you're doing this, what this is and to keep talking about it — it's not just one and done," says Taylor. "You need an ongoing campaign to remind people that this benefit is out there."

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Since what an LSA covers is completely up to the employer's discretion, benefit leaders should ensure it encompasses what employees want most. If employees go to use their LSA and suddenly find that it doesn't include their needs, it will leave a bad taste in their mouths, says Taylor. 

"It's brass tacks for employees — they want to know what they can get out of this," she says.