From Marketplace.org:

Most Americans are used to the idea of having to wait to receive their wages until payday, often a bi-weekly or monthly affair. That’s starting to change, as more businesses are offering employees earlier access to their earnings. The practice doesn’t really have a name yet, though some refer to it as Instant Pay. Some of the services that offer it include Activehours, FlexWage and PayActiv.

The idea is that employees can get paid for some of the hours they’ve already worked, with the balance of funds coming on payday. “This is neither a loan nor an advance. It’s already earned. It’s just a technology solution. We change the frequency or velocity of money,” said Safwan Shah, founder and CEO of PayActiv.

Have your students do a webquest to determine the pros/cons of these new services:

• Visit the websites for these three companies (Activehours, FlexWage and PayActiv are mentioned in a few articles)
  • PayActiv video here (1:45)
•  Articles:
  • American Banker (from 2014): Can reengineering the pay cycle disrupt payday lending? 
  • NY Times: New payday options get money to you faster – for a price
• Questions:
  • How do these services work? What is the process of getting you money before your paycheck?
  • How do they market their services (i.e. what are their websites emphasizing?)
  • Can you sign up as an employee or do you have to go through your employer?
  • What are the various fees for using the services?
  • What are the pros and cons of these services?
  • How do these options compare to payday lending? Do you think InstantPay is a better deal?
  • Would they sign up if their company offered this as a benefit?

Given the low number of Americans that have emergency savings funds (47% say they don’t have $400 available for an emergency), it is not surprising that employers may find this a valuable benefit for their employees (if they have the cash flow available to fund it!).

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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