Members' Need for Financial Education

It would be surprising if credit unions thought their members knew all there is to know about managing money.

After all, the media has documented many times how nearly every demographic group needs help managing its finances. From new immigrants to dual-income households, from the uneducated to the well educated, the need for help in managing finances is never ending. And if you think the younger generation will be any different, think again. Every two years the JumpStart coalition documents a new group of aspiring adults graduating from high school that is not ready to manage its money.

The good news is that three out of every four credit unions responding to CUNA's financial literacy survey believe their members need personal finance information. While we did not survey credit unions with less than $10 million in assets, there is no reason to believe their members have all the money management information they need, either.

In fact, more than a third of our respondents said members have a "strong need" for personal finance information (Fig. 1). That should not be surprising. The economy has stumbled. The mortgage bubble has spread misery across the markets. Foreclosures and delinquency rates are rising. And the New York Times has had the audacity to suggest that "the same nation that pioneered the no-money-down mortgage suddenly confronts an unfamiliar imperative: Americans must live within their means."

If consumer spending hasn't maxed out, it's likely taking a vacation. Where credit counselors were once swamped with calls from people of modest means, they are now almost as likely to receive calls from professionals earning six-figure incomes. Have consumers been borrowing heavily against their assets to finance their day-to-day lives?

From 1980 to 2007, consumer spending swelled from 63% of the economy to more than 70%. At the same time the share of after-tax income absorbed by household debt increased from 11% to more than 14%. Between 2004 and 2006 Americans pulled more than $800 billion a year from their homes via sales, cash-out mortgages, and home equity loans.

Clearly there are segments of your credit union's membership that need help managing their finances so they can reach their financial goals. Is your credit unions ready to help?

Roughly 70% to 80% of executives in credit unions from all asset sizes believe their members have a vital need for personal finance information. And as stewards of members' money there has never been a more important time for credit unions to get behind a personal finance initiative.

Next: The Spectrum of Credit Unions' Financial Literacy Programs

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