We live in the age of information, with any and everything that we’ve ever wanted to know available at our fingertips. And yet, the overall financial literacy in this country is incredibly low.
According to Forbes’ analysis of FINRA’s National Capability Study, two-thirds of Americans could not answer four answers correctly on a five question test about basic financial concepts.
The National Financial Educators Council reports that 39% of millennials worry about their financial future “at least once a week,” and that only 14% of baby boomers have a written retirement strategy.
The solution to low financial literacy lies in financial education, and credit unions are uniquely positioned to provide their members and potential members with free financial education. More and more, financial institutions are beginning to accept and embrace their role as educators.
Credit Unions as Educators
According to the 2014 Consumer Financial Literacy Survey, 73% of adults said that they could benefit from advice and answers to everyday financial questions from a professional. Clearly, there is a need for financial education; by providing your members with financial education, they will turn to you as their trusted source of valuable information.
Research from the Department of Treasury indicates that “people who have had financial education participate more often in retirement programs, make larger contributions to the program, and have a much higher savings rate than others.”
A financial education program can help your credit union demonstrate its expertise and strengthen relationships by offering free classes or seminars to members and prospective members. Offering such helpful information and services will help to empower your members to understand their own personal finances and make more informed decisions.
By improving your members’ overall financial literacy you can add enormous value to their lives. When your members are well-versed in everything financial, it helps your bottom line. Those who are financially educated maintain more robust account balances and higher credit scores, and understanding the importance of valuable insurance products may lead to them making the investment.
Implementing a Financial Literacy Program
There are many different ways to approach implementing a financial education program. Millenials, in particular, demand self-serve options, for both transactions and information. The best way to accomplish this is to create an easily accessible resource library on your website and/or online banking portal. The library could be split into key topics, like these:
- Investing at different stages of life (recent graduate, new marriage, new child, etc.)
- Investing for retirement
- College savings options
- Homebuying and financing tips
- Car buying and financing tips
- Lower-cost alternatives to payday loans
Financial education could be a fun project that your credit union could get creative with. Consider hosting a webinar. You could also offer in-person classes, workshops, or seminars on similar topics.
Regardless of how you decide to present the information, each topic should include relevant, easy-to-understand resources, such as tip sheets, guides, calculators, short videos, tutorials, and any other items that your members and prospects may find valuable. Providing 24/7 access to the information your members need, with the ability to digest it at their own pace, is key to meeting your members’ self-serve needs.
When implementing a free financial education program, remember to cater to your community’s individual characteristics; for example, if your area has a large Latino demographic, classes in Spanish might be useful. If your credit union is in a college or military city, you could offer education centered on student loans or homebuying options for veterans.
An important part of providing your members with financial literacy is in turn providing them with the products and services they need to help them be financially sound. If you’ve done a good job educating your members, it will make sense for them to purchase valuable products from their trusted and knowledgeable credit union.
Learn about the components that should be included in your risk management program in our latest ebook, The Right Tools for Risk Management.