5 things credit unions must do to promote financial literacy in their communities
The TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) shows most US Adults have a generally low level of financial literacy—a trend seen over eight consecutive years. With this stagnant level of financial literacy, it’s important for credit unions to not only educate their community on financial topics, but also make it comprehendible across all socioeconomic demographics.
The good news is that despite the general US population’s low level of financial literacy, consumers are 28% more trusting in their financial services provider, which means they are more likely to seek help from them to understand their finances.
In my work at the California Credit Union League, I see and hear from hundreds of credit unions each year who are helping to create more financially healthy, stable communities. Here are the top five ways that credit unions should consider promoting financial literacy in their communities:
When it comes to educating your community, meet them where they are
Boosting the financial literacy of your credit union’s members can be achieved by engaging with them on the platforms they use and places they visit most. Proactively providing valuable resources and information in their communities enables credit unions to not only support but help communities thrive.
Credit unions have a unique opportunity to empower their members by leveraging opportunities they may not already be utilizing. This could involve offering weekly or monthly newsletters that provide financial education, investment recommendations, and other financial advice to members while they are in their own homes. You can also post how-to or explanation content on social media and host seminars on basic financial literacy topics in middle and high school classrooms to reach youth. Alternatively, credit unions can collaborate with teachers to integrate financial literacy into their curriculums, thereby enhancing the impact of their reach.
Another effective way to connect with your credit union’s community is through the incorporation of a financial podcast. This medium offers a convenient and accessible avenue for busy members to access financial education, even when they may not have the time to meet in-person.
By meeting members where they are, credit unions can identify unmet financial needs quicker and tailor financial literacy programs to their members’ specific needs. This approach not only empowers members to make informed financial decisions but also demonstrates the credit union’s commitment to their financial well-being.
Encourage members to meet with a financial advisor or wealth advisor to discuss their needs in a more tailored way
Financial advisors play a crucial role in building trust and confidence with credit union members, especially around making investment goals, retirement plans, spending and budgeting, family planning and more. These financial experts provide solutions and unique resources to help strengthen your credit union’s service to your members.
By providing a go-to coach or advisor, credit unions not only build trust with the members but also help them develop a healthy relationship with money. So, it’s important to raise awareness to your members that this personalized support is readily available to them.
Educate about basic debt management and overdraft protection
Along with encouraging members to meet with a financial or wealth advisor, increasing member knowledge about managing debt and how overdraft protection works is a must. Overdraft protection, a service provided by many credit unions, is a convenience and benefit to ensure member transactions are covered when they do not have sufficient funds in a checking account.
As credit unions continue to proactively address and secure the financial well-being of their members and community, they’ll need to adapt their overdraft programs. This proactive approach ensures that members can rely on credit unions to provide the best financial services and support, including reducing fees on small transactions, adding credit cards to the range of linked-account options, eliminating transfer fees, reducing transaction fees that result in a negative balance and automating a fee waiver process.
How do we adapt? Some credit unions are placing a significant emphasis on developing their staff. For example, the California and Nevada Credit Union Leagues recently started a Financial Counselor Academy. The 13-week program is a convenient avenue for more credit union staff to become certified to educate members about complex financial matters, such as overdraft protection and managing debt. This investment in staff development demonstrates our commitment to members’ financial well-being.
We must keep in mind that members turn to credit union overdraft protection as a flexible option during financial distress. Overdraft protection is a helpful safety net that members choose to use—and can count on—as a safeguard and convenience. Their alternatives may be high-interest, predatory payday lenders or other under-regulated creditors, which we want them to avoid.
Ninety-eight percent of credit unions waive overdraft or NSF fees on a case-by-case basis; according to the 2023 Federal Reserve Meeting Survey, 78% intervene when a member engages in frequent overdrafts, and 71% provide targeted outreach or education to members who miss payments.
It is essential that members understand these basics when entering and/or progressing their financial journey so they can make decisions and use their money wisely.
Address financial literacy gaps
There are significant gaps in financial literacy among various socioeconomic demographics, and credit unions must address this by tailoring financial education efforts specifically for these groups.
For instance, the 2024 TIAA Institute-GFLEC Personal Finance Index found financial literacy among women has consistently been below that of men. There is a 10-point gender gap in the percentage of index questions correctly answered in 2024. Financial literacy levels among Asian and White Americans are roughly equal, and among Black and Hispanic Americans are roughly equal at lower levels. Financial literacy tends to be low across generations, but particularly among Gen Z.
Currently, there are fewer opportunities for these underserved community members to succeed financially. This is a pressing issue as these individuals are more likely not to make sound financial decisions, incur debt and experience financial hardship that can significantly hinder their quality of life.
To address this, credit unions can provide a range of resources, from financial literacy materials to one on-one counseling, at no or low cost for these communities. By keeping these communities and potential consumers in mind, credit unions can start to make a significant impact. For example, by holding pro bono community financial literacy sessions and counseling at community centers such as public libraries, schools, event centers, or other local facilities, credit unions can impact the financial trajectory of these minorities that need more hands-on support.
Help communities build healthy, positive money mindsets
One’s money mindset significantly impacts one’s financial decisions, goal setting, and prioritization. Encouraging members to take time each year to revisit savings strategies and update their financial mindset will enable them to adopt a fresh perspective on their existing plans. This process allows members to fine-tune their financial goals. It’s vital for members to ask themselves: Are my current spending and savings habits aligned with both my short-term and long-term goals, as this alignment is key to financial success.
It’s important to leave consumers feeling optimistic about the potential benefits of even slight changes in their saving habits. These adjustments can have a significant impact not only in the short-term, but also in the long-term by enhancing their financial well-being and security.
Conclusion
Providing educational content to raise your members’ financial knowledge base is a win-win for members and credit unions. No stone should be left unturned when helping members of any age and demographic, including current and potential members.
The five ways I’ve outlined above can help boost financial literacy within the communities you serve.
