The document discusses hybrid financial products that could help address Americans' short-term financial insecurity and long-term savings needs. It notes that about 1/3 of US households struggle with income and expense volatility month-to-month and 60% experience a financial shock annually. Yet 44% do not have $400 for emergencies. It proposes hybrid products that combine features of short-term and long-term financial products, such as combining spending and savings in one account, to help people better manage their finances and meet both current and future needs. Sidecar savings is presented as one example where formalizing accidental short-term withdrawals from long-term savings could help reduce losses and increase affordable liquid savings options.

1. Hybrid Financial Products:
Solutions for a New Era of
Financial Instability?
JEREMY SMITH
PROJECT DIRECTOR, ASPEN INSTITUTE FINANCIAL SECURITY
PROGRAM

2. Short-Term Financial Insecurity
Affects Millions of Families
Mounting evidence:
 Income volatility is prevalent – 1/3 of US households struggle to cope
 Expense volatility can vary by nearly 30% per month
 Financial shocks – up to 60% of households experience one in a given year
 Lack of savings buffer -- 44% of Americans do not have $400 to cover emergency
expense
Families Can’t Save for Long-Term Goals if they are overwhelmed by short-term needs
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3. Households Have Need for Short- &
Long-Term Products
The Wobbly Three-Legged Stool:
 Tier 1 Universal Pensions
 Employer Pensions
 Private Savings
Wanted: A Stepping Stool for Short-Term Needs
 Emergency Savings
 Affordable Credit
 Social Insurance – Not All Needs Can Be Solved Individually
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4. Hybrid Products
A working definition:
Hybrid products combine the functions
of two or more consumer financial
products that are generally offered
separately, integrated for the purpose of
improving people’s capacity to effectively
manage their money
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5. Types of Hybrid Products
 Spend & Save
 Borrow & Save
 Budget & Save
 Payroll Plus
 Save & Save
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6. Key Features of Hybrid Products
 Data Matters: Understand Financial Needs and Patterns
 Behavior Matters: How Do People Actually Manage Their
Money
 Design Matters: Products Must Meet Real Needs
 Rules Matter: Need for Space to Experiment
 Employers Matter: Building the Business Case for New
Benefits
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7. Sidecar Savings
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Leakage –Estimates indicate as much as 40% of
each dollar saved leaks out of the US system
In effect, we have a hybrid short-term/long-term
product, but it developed accidentally
Formalizing the process, with intentional design,
could:
 Reduce loss of long-term funds
 Increase access to simpler, more affordable
liquid savings

8. For More Information:
Two Birds, One Stone: Using Hybrid Financial Products to Manage
Income Volatility
https://www.aspeninstitute.org/publications/two-birds-one-stone-
using-hybrid-financial-products-manage-income-volatility/
Driving Retirement Innovation: Can Sidecar Accounts Meet Consumers’
Short- and Long-Term Financial Needs?
https://www.aspeninstitute.org/publications/driving-retirement-
innovation-can-sidecar-accounts-meet-consumers-short-long-term-
financial-needs/

9. The Aspen Institute Financial Security
Program
The Aspen Institute is an educational and policy studies organization
based in Washington, DC. Its mission is to foster leadership based on
enduring values and to provide a nonpartisan venue for dealing with
critical issues.
The Financial Security Program is dedicated to solving the most critical
financial challenges facing America’s households, and to shaping policies
and financial products that enable all Americans to save, invest, and own.