Data Tells the Financial Capability Story – Use it Strategically
Industry research reports that two out of three families lack any type of emergency savings; 78% of adults live paycheck to paycheck, and three in five adults do not maintain a monthly budget. We see millions of Americans who lack financial planning skills struggle every day with their money and wind up in debt.
As financial decision-making grows more and more complex, members look to their credit union to help them navigate the way forward. Credit unions are intricately woven into the fabric of members’ lives. We have access to detailed transactional data that tell the story of their financial life. Are they bouncing checks? Paying more in late fees than they have in their account? Have a low savings balance? Defaulting on a mortgage loan? Making just the minimum payment on credit card balances and sometimes making it late?
Your member data tells a story. Stories allow us to share information and create an emotional connection, which allows us a deeper understanding of another person’s experience in the world. A story’s most important function is to remind us we aren’t alone in the world. If you’ve ever struggled financially, you know the toll it can take on your health, the feelings of loneliness, and financial distress.
What is the story your member data is telling you? Many credit unions offer financial education because we know that building a foundation of financial knowledge can lead to a stronger sense of financial well-being. However, we also know that knowing and doing are two different things. Your data tells the real story of how they are really doing with their money. It reveals their financial capability.
How can we move from financial education to financial capability? Firstly, we use data to lead the way. Then, we coach our members by setting up a household budget, leading them towards a higher credit score, counseling them regarding their debt reduction strategy, and creating a retirement plan. These suggestions are active, hands-on, “walk with you” ways we can improve our member’s financial capability. These suggestions require empathy, active listening, staff with financial coaching skills, and time. Sometimes we want a shortcut. We want to offer a “one and done” class or “throw an app at it,” and those solutions should be part of a solution, but true member loyalty comes from a member knowing we are “in it” with them and we are by their side guiding them to improved financial health.
Financial education is a development issue and a core mission of the credit union movement. It is a win-win to invest in the financial well-being of your members. They win, of course, but so does the credit union. Members with a solid personal finance foundation are essential to the health of your organization. When a member can make better financial decisions, they’re more fully able to use the products and services you offer.
Members are looking to us for guidance. Are our employees ready to help them? How will you prepare them to be financial guides? How will you incorporate your members’ financial capability needs into your 2022 strategic initiative?