Personalization, products, and partnerships: The 3 Ps of impactful financial education

Do you find yourself hit by the nagging feeling that a growing percentage of your members are struggling financially? Research proves it’s more than a feeling. The Financial Health Network’s 2022 Financial Health Pulse™ found that 70% of American adults are in a shaky spot financially—a combination of those that are financially vulnerable (15%) and those that are financially coping (55%).

Perhaps even more disconcerting, for the first time in the survey’s five-year history, the percentage of people considered financially healthy has decreased. Standard & Poor’s Global Financial Literacy Survey also confirms there’s reason to be concerned about Americans’ financial well-being. It gave the U.S. a #14 ranking when it comes to the percentage of American adults who are financially literate—which, according to this article puts us on roughly the same level as Botswana, a country whose economy is 1,127% smaller.

Financial education is often touted as a way to help the financially vulnerable. But what does it take to offer financial education that will reach your most vulnerable members? Sure, building a financial education library on your website is a great place to start—blog posts and self-paced webinars can be helpful resources for many.

But for members struggling to afford basic expenses, it’s not particularly helpful and even potentially insulting to imply that they can simply budget and save their way to their financial well-being.

Instead, try using a “3P” model — personalization, products, and partnerships — to help close the gap between financial vulnerability and well-being in a meaningful and sustainable way.

Personalization

In today’s financial services landscape, personalization often refers to online experiences. But your most stressed-out members are going to need a more high-touch, proactive approach.

First, you are going to need a nuanced and complete understanding of the challenges they face. One tool that can help is the United Way’s ALICE model. ALICE stands for Asset Limited, Income Constrained, Employed. People who fall into this category are above the Federal Poverty Level but struggle to afford basic expenses (which the United Way defines as housing, childcare, food, transportation, healthcare, a smartphone plan, taxes and a small contingency).

United Way’s data found 35 million ALICE households (representing 29% percent of all households) in 2018. Twenty-two states plus the District of Columbia are currently part of the program. If your state is one of them, you’ll be able to access county-specific data that could go a long way toward pinpointing the most significant challenges your financially vulnerable members likely face.

In Oregon, where PixelSpoke is headquartered, ALICE defines a monthly “survival budget” for a family of four as $6,115—which would require a full-time hourly wage of $36.69, after tax credits. Perhaps not surprisingly, nearly half (44%) of Oregon households are below the ALICE threshold.

If your state isn’t part of the ALICE program, you can still borrow insights from the national reports to improve your efforts to meet the needs of the financially vulnerable.

3 ideas for getting started:

1. Hold 1-1 conversations with ALICE members and use your insights to create empathy maps.
2. Take advantage of these resources from The National Credit Union Foundation to define the need and assess opportunities for impact.
3. Explore Inclusiv’s Pathways to Financial Empowerment program, specifically designed for low-income and underserved people.

Products

Once you have assessed the needs of your most financially vulnerable members, ask yourself if there are products you already offer or could consider offering to help address them. Financial education is too often treated as a “side project” of the marketing department, not as a core competency integrated throughout a credit union’s products and services.

We love that all frontline staff at Peninsula Community Federal Credit Union, from tellers to member service reps to loan officers, are also certified financial counselors. That way, financial education doesn’t get relegated to a single counselor or a single page on your website, but can instead be woven throughout any and all interactions a member has with your credit union.

Such comprehensive financial education efforts are not only impactful, but they can also increase member loyalty. According to a 2022 J.D. Power survey, 63% of consumers won’t switch banks and 78% will keep working with their existing bank if they get support during difficult times.

When evaluating your product mix, talk to both your financially vulnerable members about unmet needs and to your frontline staff, who have a finger on the pulse of which members may be getting denied loans or asking for overdraft fee waivers. Data from your online banking and application vendors can also help you identify key trends. At a New England-based credit union, such data revealed that the 53% of their membership who make under $75,000 per year pay 76% of courtesy pay fees for overdrawn deposit accounts. This led the credit union’s lending team to ask how they can help members find alternative cash flow solutions.

3 product categories to consider:

1. Credit (re)building: DC Credit Union offers both Credit Builder and Second Chance Credit Rebuilder loans to members with no or poor credit. Peninsula offers an entire suite of “Second Chance” products, including auto loans for members with damaged credit.
2. Deposits: DC Credit Union offers checking & savings accounts with no Social Security number or Tax ID number needed. HOPE Credit Union’s Transformational Deposits program enables members with means to “be a catalyst for good in low-wealth, underbanked communities.”
3. Loans & Mortgages: More and more credit unions are offering payday alternative loans to help protect members from predatory lending. Embold Credit Union has a whole suite of ITIN Lending products; Clearwater Credit Union has responded to a direct need they have seen in Montana with a loan product for manufactured homes, which are typically difficult to finance and sit on leased land, putting homeowners in unstable tenancy relationships.

Partnerships

Unfortunately, even the most robust outreach efforts and product offerings will only go so far. It’s unlikely your credit union alone can solve all the financial challenges your most vulnerable members face. That’s where partnerships can come into play. Partnerships can allow credit unions to team up with other credit unions, nonprofits, advocacy groups, and grant-making organizations to expand and amplify impact.

And yes, there are tangible benefits for your credit union, too. Partnerships can expose new potential members to your credit union, increase your credit union’s visibility through press coverage, and also increase member engagement. For example undocumented immigrants may be more likely to ask for help from a credit union that’s been “vetted” through their church or another trusted community partner.

Credit unions can work with a variety of players—from governments and nonprofits to other credit unions and educational institutions—to improve financial well-being for their members and their communities.

3 examples for inspiration:

1. The Opportunity Center @ Othello Square includes a school, a children’s medical clinic, an early learning center, affordable cooperative housing, a small business incubator, and access to financial services by the way of Verity Credit Union’s newest branch.
2. A group of Spokane-area credit unions partnered with the Spokane Low Income Housing Consortium and GoWest Foundation to establish the area’s first-ever land bank, which will make property available for the development of low-income housing. See other ways that credit unions have joined forces to tackle affordable housing.
3. Credit unions in Ontario, Canada have joined and actively support the Ontario Living Wage network, including becoming certified themselves as Living Wage Employers.

Your most vulnerable members are counting on you to help them get on a better path to financial well-being. Unfortunately, most financial education programs in their current state just aren’t cutting it. Truly impactful financial education that focuses on your most vulnerable members isn’t easy, and it won’t happen overnight. But we can always find ways to do better, and as a result, help our members do better, too.

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