Postsecondary education remains one of the most important pathways to wealth building, but it remains out of reach for many, especially those with low and moderate incomes (LMI). Over the last two decades, the inflation-adjusted cost of attending in-state public universities has risen by 56%. 

529 plans are tax-advantaged investment accounts designed to help families save for education—yet very few LMI families currently use them. Despite many states’ efforts to create opportunities to extend education savings to more households, a key barrier remains: families require an accessible reserve of funds for financial emergencies in the intervening years. Withdrawals from 529s for nonqualified expenses, including emergencies, incur taxes and penalties.  

With the Pennsylvania Treasury Department and Flourish FI (a technology company), Commonwealth designed the Savings Pocket Pilot to test the hypothesis that families may be more comfortable saving and engaging with 529 plans if they could simultaneously save and access funds for emergencies without penalty. The Savings Pocket allowed users to save for emergencies and educational expenses through a mobile app. 

Key Learnings

The pilot ran for six months, from April 2023 to October 2023. Through tracked direct data, monthly surveys, and interviews with select participants, Commonwealth uncovered the following key findings:

• Integrating 529s and emergency savings can encourage 529 usage and help people save. While contributions into participants’ liquid savings accounts were relatively consistent, deposits into participants’ connected PA 529s increased throughout the pilot 
• Overall, pilot participants had a positive experience with the Savings Pocket—they understood the tool and how to use it. Monthly surveys indicated that 65% of participants reported a “good” or “excellent” experience, and 35% said they would continue using the tool after the pilot ended. 
• Participant feedback supported several design features: connecting multiple 529s to one account, customizable emergency savings goals, fast withdrawals, and design with simplicity. 
• Across all participants, early evidence implied that specific personas saw the most benefit from the tool. Commonwealth identified three distinct “savings personas” for whom a 529-linked emergency savings account proved most impactful:

1. People who Struggle to Save and need a safety net before saving for a long-term goal, such as post-secondary education. Half of the participants without any emergency savings started saving during the pilot.
2. Previous savers who Need a Nudge to get back into the practice. Having the app at their disposal encouraged regular saving for some.
3. Seeking a Savings Education and want to learn more about emergency and educational savings. 27% of participants reported liking learning how to save for emergencies and education through the Savings Pocket.

Potential for Impact

Our analysis indicates that a 529-linked emergency savings tool like the Savings Pocket could impact the savings practices of families across income levels. Even without implementing a Savings Pocket, other pilot elements helped people save: savings goals, gamification, and easy access to account balances through mobile devices. 529 plan administrators are crucial in developing and implementing modifications that enhance accessibility and flexibility for all savers. Third-party apps can also link emergency savings and 529 plans to a nationally accessible scale. We encourage consideration of a broader use of 529 plans—one that would facilitate emergency and education savings. Allowing up to $1,000 penalty-free withdrawals for LMI families would give more people access to emergency savings without new infrastructure.