Credit unions can help financially stressed members by offering financial wellness education

Without a doubt, COVID-19 has hit Americans hard. Not only are they dealing with the health threat of a pandemic, but also with the financial fallout. In fact, there are few people who have not been touched financially in some way, whether by something as immediately tangible as the loss of a job, or by something a bit further into the future, such as a lagging 401k that will affect eventual retirement.

A recent SoFi At Work survey found that nearly 60 percent of employees think financial wellness education is even more important now due to the pandemic, and 53 percent say they would be less financially stressed if they had access to financial wellness programs. The survey also found that 48 percent would be more committed to staying with their employer longer; 37 percent would be more likely to recommend their employer to friends, and; 30 percent would be more productive at work.

Credit unions have an opportunity to help members improve their financial wellness by offering financial literacy education. This also benefits the credit unions through increased member loyalty and referrals. And some organizations are even offering free financial wellness services during this pandemic.

Financial Stress Rising

A recent Pew Research Study found that financial stress due to COVID-19 is causing financial issues for Americans:

  • 25 percent are having trouble paying their bills
  • 25 percent of American households have someone who has been laid off or lost their job
  • 33 percent of households have someone who has reduced hours or took a pay cut

A Nation Endowment for Financial Education’s (NEFE) survey found that these issues cut across all ethnicities and income levels, with 79 percent of those making both less than $50,000 and more than $100,000 concerned about their finances.

These issues have led to financial decisions that will have a long-lasting impact, such as:

  • Saving less money than normal (36 percent)
  • Paying bills with savings or retirement funds (33 percent)
  • Borrowing money from friends or family (17 percent)
  • Deferring payments (12 percent)
  • Using more credit (10 percent)

Financial Wellness Education Can Help

Every American adult needs to know how to manage money effectively. This is true no matter the age, background, ethnicity, or gender, and is true both in good financial times and in bad. Although financial wellness education does not have the ability to restore lost jobs or increase 401k growth, it can help participants make appropriate choices when financial crises arise.

When credit union members have a firm grasp of sound financial principles, they have the tools necessary to make wise financial choices that can limit the damage caused by financial setbacks, such as COVID-19.

For example:

  • Understanding how to budget (and adapt that budget due to current economic conditions) allows people to make necessary changes to keep from going into debt or borrowing from their future during difficult times.
  • Before the pandemic, two thirds of Americans did not have sufficient emergency savings. Financial wellness education provides members with the tools to achieve their savings goals and replenish their emergency savings during trying times, which has been shown to lower financial stress significantly.
  • With the widespread financial crisis have come widespread financial scams. According to the Federal Trade Commission, scammers targeting federal relief money, among other things, have taken over $77 million from unsuspecting Americans. Financial wellness programs can educate members to help them avoid scams and fraud.
  • Many lenders are willing to work with consumers during this time of financial crisis. However, this will only happen when consumers communicate with lenders in a timely fashion. Financial wellness education provides information about financial contracts to give members the confidence to work with lenders to create different payment options for such things as credit cards, mortgages, taxes, and other bills.

Credit Unions Are Positioned to Help

Credit unions are a naturally good fit for providing this much-needed information to their members because members see their credit union as a partner when managing their finances. According to a Consumer Banking Insights survey, 64 percent of Americans feel that credit unions provide better, friendlier, hands-on personal service than traditional banks.

The difference lies in customers versus members. Credit unions, structured as cooperatives, exist to service their members rather than focus on profit generation.

Because members come first, providing empowerment through education is a natural fit.

As members understand more fully how to handle their money, during both good times and times of crisis, the financial wellness of each member will increase. This, in turn, increases the trust between members and the credit union, which ultimately improves member retention as well as increases the number of members. It’s a win-win situation.

Kris Alban

Kris Alban

Kris Alban is executive vice president of iGrad, a San Diego-based financial technology company that provides artificial intelligence-powered financial wellness solutions to employers, financial institutions, colleges and universities. Its Enrich ... Details

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