The Power of Financial Advocacy

While it's true that many positive trends point toward an improving economic environment (i.e. unemployment, bankruptcy filings and mortgage delinquencies are finally at pre-recession levels), the real-life financial health of American households tells a different story. Here are just a few of the challenges families face today:

The median household income is below pre-2000 levels;
One in four consumers do not pay their bills on time;
Sixty percent of households do not have a budget; and
National homeownership levels have fallen to 1993 levels.

There's also the shadow cast by a looming student loan crisis. With 37 million Americans owing more than $1.3 trillion in student loans (and climbing), we see parallels to the subprime market prior to the mortgage crisis.

At BALANCE, where we provide financial counseling to credit union members on topics such as home buying, bankruptcy and credit management, we see firsthand the effect student loan debt has on consumers. Roughly one in three phone calls we receive come from members asking for student loan repayment assistance. Often times it's the parents phoning because their Social Security is being garnished and they were unaware of what it meant to co-sign on a student loan.

Even the most basic gauge of financial health – a savings account – has taken a hit in the family home. According to research conducted by the Federal Reserve, 47% of respondents said they could not come up with $400 if a financial emergency arose.

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There's much we can do to help members navigate these financial realities. From better management of the family paycheck to creating a savings plan, credit unions are in a position to provide the education and resources to financially empower their members, and create long-lasting relationships in the process.

And it can't come a moment too soon. Just as the tech sector altered the entertainment, publishing and transportation industries, the financial services industry is at a similar crossroads. For as much attention that millennials receive from the credit union industry, there's still the threat of a mass departure of young members to tech brands. According to a recent study, 70% of millennials said companies like Amazon, Google or Apple would get their banking business if they offered financial services.

Amazon recently tested these waters when it partnered with Wells Fargo to offer discounted student loans as part of its Student Prime program. Although the loan program ended after only six weeks, it's an indication that Amazon has an interest in student financial services. And with Google and Amazon executives aggressively funding financial education programs to enter classrooms, there's no denying that both companies have their eyes set on the financial services industry via education.

This is why it's imperative for credit union leaders to ask themselves the following questions: What can we do to financially empower our members? How do we build on our history of providing financial guidance? What steps can we take to lead on issues like saving for the future, student loans and managing debt?

First, we must look for opportunities to assist people who may be slipping through the cracks. One segment is military members. Unfortunately, many of our service members are subject to a number of financial challenges. The National Foundation for Credit Counseling published a study revealing service members and veterans have higher than average credit card debt and fewer assets. Adding to the strain is frequent relocation, which impacts family budgets, savings and housing expenses. Credit unions should be prepared to assist the unique needs of service personnel on issues dealing with deployment, identity theft, student loans and rent-to-own scams.

Then, of course, there are millennials. Twitter is filled with 140-character solutions on millennial outreach. These usually revolve around two key issues: Technology and student loans. Credit unions can add financial education to the short list. This is a generation that craves information and is self-sufficient in their fact gathering. Financial education efforts should encompass multiple channels to accommodate a variety of media consumption styles. Online modules, blog posts, podcasts, social media, online workshops and webinars are among the tools to consider. But most importantly, don't underestimate the power of a one-on-one conversation. While it's true that most millennials are self-sufficient, when confronted with a problem they can't fix on their own, they turn to a trusted source. This explains the immense popularity of the Apple Genius Bar.

On the other end of the age spectrum are financial issues affecting seniors. Today's older Americans are living longer, leaving many unprepared and faced with the realization that Social Security is not a sufficient retirement vehicle by itself. And with an increasingly complex financial landscape, older consumers shoulder more financial decisions, leaving some susceptible to fraud and elder abuse.

Your staff should be able to recognize these diverse situations and be prepared to guide members. BALANCE has provided training to credit union employees who later went on to counsel members on topics such as avoiding foreclosure, student debt and rebuilding after a financial crisis – all to the appreciation of their members.

To become a financial advocate, look not only within your membership, but to your community, local government, schools, youth centers and beyond. Reach out and see where you can make an impact. At BALANCE, we are in constant communication with these types of organizations, providing counseling and online education to consumers from all walks of life. What we find is that there is a serious need for this type of outreach. I encourage credit unions to become financial advocates and lead the way toward empowering their members' financial lives.

Kathryn Davis is president/CEO, BALANCE. She can be reached at 800-777-7526 or [email protected].