Lifestyle Savings Accounts’ Connection to Financial Well-Being

As employees’ sense of financial stability continues to waver, HR and total rewards (TR) professionals are turning to lifestyle savings accounts (LSAs) as a way to support them. LSAs, which can cover employee expenses as wide-ranging as childcare and gym memberships, are now also being used to subsidize services like financial planning and offer direct monetary support.

“Employers have become more interested in a holistic approach to workforce financial well-being in the past few years, but now we see them going a step further,” said Hannah Johnstone, a financial well-being consultant at risk management and consulting firm Gallagher. “Employees want help with their exact situation. … Personalization is the name of the game, and LSAs fit firmly within that value proposition.”

Growing Financial Pressures 

The rising cost of living has exacerbated financial stress. For instance, only 1 in 3 American workers feel confident they are on track to retire comfortably, according to a 2025 NFP U.S. Retirement Trend Report. Additional research conducted by isolved, a human capital management software (HCM) company, found 76% of business owners believe most employees are living paycheck to paycheck.

 “When I talk with business leaders, one of the first things they’ll quietly admit is that a lot of their people are just trying to get through the month,” said Amy Mosher, isolved’s chief people officer.

It’s not surprising then that consulting firm WTW’s U.S. Wellbeing Diagnostic Survey showed financial well-being is the top employee challenge for employers, and also the area in which they believe they’re least effective. According to the survey data, only 19% of 535 polled organizations (which collectively employ 8 million workers worldwide) said they are effective at supporting the financial well-being of their workforce.

Employers are responding with a variety of options. Auto enrollment and escalation for retirement accounts, now mandatory in the U.S. due to the SECURE 2.0 Act, have been supplemented with benefits like student loan repayment matching, tuition reimbursement, and emergency savings or loans.

“Money stress looks different for everyone,” Mosher said, but LSAs can provide even more flexible ways to address employees’ specific financial challenges.

Benefits of LSAs

Unlike traditional benefit accounts like health savings accounts (HSAs) and flexible spending accounts (FSAs), LSAs are not tax-advantaged, giving employers wide latitude in what they choose to cover. As Johnstone explained, “[they] feel more like cash than any other benefit an employer offers.”

LSAs are often viewed as a tool to foster employee loyalty and retention. They also can be structured to offer a wide range of benefits supporting financial well-being, including financial planning services or coaching, assistance with major life expenses like buying a house, and a wide range of other services offered directly or reimbursed by the employer.

“We are seeing employers use LSAs as the connective tissue in a holistic benefits ecosystem,” Mosher said. “Accounts like this ensure employees can meet their regular expenses and save for retirement at the same time.”

Strategies for Strong LSAs 

While LSAs provide growing levels of flexibility, they have potential downsides — among them, the taxable nature of the benefits and the need to manage and verify a wide range of expenses. “The complexity of the offering can multiply quickly,” Johnstone said.

Among the strategies for using LSAs to support financial well-being: 

• Think carefully through offerings. HR/TR leaders should consider both employee desires and overall organizational goals for supporting financial well-being. Surveys, listening sessions and “quick pulse checks” can identify where employees are struggling financially, Mosher said. At the same time, it’s important to prioritize what Johnstone called “purposeful” financial activities, such as paying down debt, and consider what services offer the most value. Organizations using LSA funds for childcare and financial advice services are “getting the best value right now,” Johnstone said.
• Provide direct connectivity to services. According to Mosher, organizations are embedding LSA-eligible services ranging from online budgeting help and financial coaching to on-demand pay services and debt support in their HCM platforms. This can help employees discover services “in the same place they already go to manage their pay and benefits instead of hunting through multiple portals,” she said.
• Find a partner to develop and administer the plan. “Employers offering a large program typically work with a vendor to do a great deal of buildout up front and manage ongoing eligibility,” Johnstone said.
• Develop a communications strategy. Like all flexible accounts, underutilization is a real risk with LSAs, particularly when they offer new benefits to which employees may not be accustomed. “Clear communication, simple guardrails and ongoing education are essential for any LSA rollout,” said Mosher.  
• Keep things simple. Plans should clearly state what services are offered, how to access funds and where to go with questions, according to Mosher. “The easier you make it, the more likely employees are to see LSAs as a meaningful part of their financial safety net, rather than a benefit they hear about once and then forget,” she said.  

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Well-Being