Our members need a cookie jar

Our world outlook will be forever shaped by our COVID experience. COVID has exposed personal and financial weaknesses. We feel more vulnerable, less secure, and less in control. This lack of control causes fear and anxiety at levels many members have never before experienced. These feelings will not disappear completely when the COVID threat lessens. The threat of COVID-20 and other unknowns will be in the back of our minds.

A survey by Bankrate showed that 63% of Americans did not have sufficient savings to pay for an unexpected expense of $500. We are a country of grasshoppers spending money faster than we can make it (an Aesop fable). Someone once told me that the cost of living in Southern California is whatever you make plus 20%. We know we should save but we tell ourselves that we will start next week.

If we have a solid financial base and a personal support system, we are much more able to cope with the challenges life throws at us. We need savings we can fall back on in tough times. I have seen recommendations of three to six months of living expenses as a target. We need reasonably priced available credit as a back-up. If you have an investment portfolio, the portfolio should be balanced so that there is a hedge if the market declines. We need to be financially literate so we can exercise good judgment and not panic unnecessarily. Finally, we need to have the ability to call upon people for help with chores and tasks, if needed. Credit unions can help with all of these needs.

Build-up Savings

Grandmother’s advice on savings is as true today as it was years ago … pay yourself first. When grandmother cashed a paycheck, the first thing she did was to put aside $25 in the cookie jar. When an unforeseen bill arose, she dipped into the cookie jar to pay the bill. In today’s world, the cookie jar can be a special account set up at the credit union which receives an automatic transfer when the paycheck is deposited. It is painless and does not require any action by the member after the account and automatic transfer is set up. The member never misses the money. Will the member be able to save three to six months of living expenses? Maybe, but the member will have the piece-of-mind knowing that there is a cushion of safety that will be there if they need it, even if it is just to pay a car repair bill.

There are other methods to help members save. The credit union can set up a round-up debit card option. If a purchase is $19.20, the debit card would be charged with $20.00, the 80 cents of the round-up is deposited to the member’s cookie jar account.

Stand-by Line of Credit

While one should be careful about using debt, having an untapped line of credit provides peace of mind that if you have an emergency and your savings are not sufficient, there is a reasonably priced credit source. There is no need to max out credit card debt which is extremely expensive.

Investment Portfolio Review

If a credit union has an investment services program, members should be encouraged to contact their financial advisor to make sure that the member’s portfolio is diversified and includes investments that are lower risk and designed to preserve principal during economic downturns.

Financial Literacy

Members need to be more financially literate to enable them to recognize and evaluate the level of risk appropriate for them. Long lectures are not the answer. Fortunately there is a fun and innovative way to learn financial literacy through the Zogo app. Zogo’s financial literacy modules are “bite-sized” that can be reviewed at a pace that suits the users. What makes this app different is that the users are paid to learn. The user is awarded points for successfully completing a module. Once the user has accumulated enough points, the user is awarded a small gift card from Amazon, Adidas, Sephora, Starbucks, etc. The app also quizzes the user on how they feel about a past purchase. For example, if the user bought a new watch, they will be later asked to evaluate how they now feel about the purchase. It is a method to teach the member to reflect upon the lasting value of the item prior to the purchase. The funds for the gift cards come from the sponsoring credit union. A Duke student, Bolun Li, developed the app which has won NACUSO’s 2019 Next Big Idea competition and the FinTech 2019 Fall Best in Show Award.

Helping Hand

The elderly and those with underlying medical conditions sometimes feel isolated and afraid, not being able to go out to do basic errands. There is the story of an elderly couple in Seattle who sat in their car in a grocery store parking lot for over an hour before they were able to flag down a young person to go into the store to buy groceries for them. There are a lot of people who are more than willing to help if they just knew of the person and the need. If the credit union had a message board where requests for assistance could be made, members could connect. With the permission of the members involved, the credit union would have many stories of kindness to share, stories that we all need to hear now. This will build a sense of community and further enhance the value of membership.

This is the time for credit unions to demonstrate that they are more than a less expensive alternative to a bank. Membership must mean something, especially in challenging times. A helping hand now will not soon be forgotten. The mission of credit unions is to help members manage their financial lives. The time to fulfill that mission is now.

Guy Messick

Guy Messick

Guy A. Messick is General Counsel to the National Association of Credit Union Service Organizations (NACUSO) and principal in Messick & Lauer P.C. in Media, PA. www.CUSOLaw.com Web: www.cusolaw.com Details

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