As credit unions celebrate International Credit Union Day on October 19, 2017, this year’s theme, “Dreams Thrive Here,” speaks volumes to the relationships that credit unions have with their members. For decades, credit unions have helped their members save for their first car and their first home, turning dreams into reality.
Saving money is not easy, but credit unions help their members achieve their savings goals with fair-priced loans and tools, such as payroll deduction, to make saving easy. As a trusted financial partner, credit unions have an opportunity to help their members save for three of the most important things in life: retirement, college, and healthcare. And members need help saving for all three.
Consider the following statistics.
- Twenty-eight percent of non-retired adults indicate that they currently have no retirement savings or pension whatsoever, according to the Report of the Economic Well-Being of U.S. Households in 2016, published by the Federal Reserve Board of Governors.
- The average amount parents have saved for college is $16,380, according to How America Saves for College 2016, Sallie Mae’s national study of parents with children under age 18. This amount would not even cover the average cost of one full year of tuition, fees, and room and board at a public four-year in-state school.
- More than half of the consumers who said that they were contacted about debt in collection noted that it was related to a medical debt, according to the Consumer Financial Protection Bureau’s Survey of Consumer Views on Debt.
Over the years, Congress has created a host of tax-advantaged savings plans, which includes IRAs, simplified employee pension (SEP) plans, savings incentive match plan for employees of small employers (SIMPLE) IRA plans, Coverdell education savings accounts (ESA), and health savings accounts (HSAs), to encourage saving for retirement, college, and healthcare. These plans provide members with generous tax savings—especially HSAs—which provide for both tax deductible contributions and tax-free withdrawals. Many credit unions offer some or all of these savings plans to their members, yet many members who need help to achieve their financial goals do not take advantage of these plans and their benefits.
As credit unions celebrate International Credit Union Day, they may reflect on how they help their members achieve financial goals. The following are tips to help members save for retirement, college, and healthcare.
Educate members about the many tax-advantaged savings plans—IRAs, SEP plans, SIMPLE IRA plans, ESAs, and HSAs—and how these plans can help them save for retirement, college, and retirement. Small business owners often cannot afford to offer a retirement plan to their employees but they may not be aware of the tax benefits of a SEP plan or SIMPLE IRA. Grandparents who want to help their grandchildren may not be aware of the ESA and its benefits. HSA owners who receive employer contributions may not be aware of the added tax benefits that they would receive by also making contributions to their HSA. As a trusted source of financial information, credit unions can provide members with the information they need to reach their savings goals.
Promote low-cost credit union IRAs, ESAs, and HSAs. Studies consistently show that credit unions charge lower fees and pay higher deposit rates than their competitors. Many credit unions offer IRAs, ESAs, and HSAs with no annual fees and low- or no-minimum balance requirements. And, if fees are assessed, they are usually lower than the fees charged by competitors. This makes it easy for members to start saving for retirement, college, or healthcare, by setting aside modest amounts on a regular basis without the worry of high fees eroding their savings.
Offer payroll deduction or automatic transfers to make saving easy. More important than saving for retirement, college, or healthcare is saving for these events on a regular basis, but members need help to keep their commitment. Encouraging payroll deduction as a way to save for retirement, college, or healthcare makes it easy and ensures that members commit to achieving their saving goals.
For decades, credit unions have helped members achieve their financial dreams. As the credit union movement celebrates International Credit Union Day, credit unions have an opportunity to help members save for three of the most important things in life: retirement, college, and healthcare. Dreams thrive here because members know that they can count on their credit unions to help them achieve their financial goals.
Ascensus has a long history of serving the credit union market. We wish all of our credit union clients a happy International Credit Union Day.