NCUA Says Credit Unions Have Unique Opportunity to Educate Their Communities
Protecting the credit union system is one of the core goals of the National Credit Union Administration (NCUA), but Chairman Todd M. Harper wants credit unions to know that the NCUA is more than just a safety and soundness regulator. “We have consumer financial protection responsibilities and part of that work is promoting financial literacy—which is a core component of a credit union’s mission,” said Harper.
In 2021, the National Financial Educators Council asked 7,246 people in all 50 states to test their current financial knowledge. The results were broken down into various age groups, with 70% considered a pass. Of particular note were the scores for younger generations: 10- to 14-year-olds averaged 57.41%, 15- to 18-year-olds averaged 65.82%, and 19- to 24-year-olds averaged 71.11%.1 These results demonstrate the lack of financial literacy in younger generations as they approach and prepare for their young adult years. Harper wants to change that.
“An educated member is the best member,” said Harper. “When credit union members have a solid foundation of personal finance, they can make smarter financial decisions and that forms the basis of a more resilient credit union system.” Those educated consumers are better able to determine what is a safe, fair, and affordable financial product, he added.
Personal finance has been a focus for Harper throughout his life, and he maintains that it is never too early to start teaching children good financial habits. “When I was 7-years-old, my family moved to a new house and there was a candy store around the corner,” he said. “I received a weekly allowance of $2, which was a lot of money for a 7-year-old in 1974.” After spending all of his earnings on candy, he realized that there was nothing left to buy Christmas gifts for his parents. Rather than just giving Harper the money, the “bank of Mom and Dad” offered him a no interest loan for the money, and he paid it off at the rate of 50 cents per week for six months. “I am so grateful to my parents for teaching me about money at an early age,” he said.
“When I was in school, we all had to take a personal finance class before graduation,” said Harper. “We learned how to balance a check book, fill out a tax form and other day-to-day financial tasks we needed as adults.”
While many states have some financial education incorporated into the curriculum, the lessons are often a small part of another class. Only seven states mandate personal finance classes as a graduating requirement. Things are looking up, though, as 21 states have bills before their 2022 legislatures to teach financial literacy as a standalone course.2
The lack of home-based, real-world lessons and formal financial literacy classes in schools provides an opportunity for credit unions to fill the gap, said Harper. Because consumers who have a strong foundation in personal finance are essential to a healthy credit union system, NCUA has created a number of financial education resources that include videos, activities and apps, worksheets, publications and lesson plans. “All of these resources are available for credit unions to use in their community education programs,” he said. (See “resources” on pg. 18)
Preparing Young People for the Real World
Whether a credit union uses NCUA resources or creates their own, the secret to success is to tailor the program to the community served by the credit union.
Mission to $AVE is a savings program offered by Mission Federal Credit Union for elementary schools, youth organizations and youth within the community that teaches students to learn how to save and to understand the value of money. More than 4,300 student savers at 44 local schools have participated in the program. Once parents set up a savings account, children can add to or withdraw from their account at the elementary school “branch,” which, prior to the coronavirus pandemic, often was a table or booth on the playground that was staffed once a week by local Mission Fed employees. The pandemic changed this, but the schoolyard branches are slowly starting again as schools allow.
“It’s amazing how quickly deposits of quarters and nickels add up,” said Debra Schwartz, president and CEO at Mission Fed. “We currently have 14,312 Mission to $AVE Accounts with total balances at $19,130,609!” Students receive swag, such as mini piggy banks, when they open the account and, as balances increase, they see how much their account has grown. An added incentive for parents and other family members to deposit into the account is the 5% interest paid on the first $500 saved until the child turns 13.
“Branches choose their school partners, which is often decided based on locations near the branch, or schools attended by employees’ children and of course, school administration’s willingness to participate,” said Schwartz. “Once the student turns 18, the account transitions into a regular savings account.”
While the Mission to $AVE program is focused on educating children 7- to 8-years-old, the credit union’s involvement with Junior Achievement of San Diego County (JA) has created a financial literacy course that includes 6 to 13 sessions on financial literacy for high school students that culminates with a visit to the Mission Fed JA Finance Park. The Finance Park is a simulation exercise in which students are guided through adult life simulations that allow them to put the budgeting, saving and spending lessons they’ve learned into practice for themselves and their virtual families.
“We donated $1 million to JA as seed money to build the facility because it teaches students lessons they need to know to prepare themselves for the real world,” said Schwartz. A student might receive a real-world virtual life scenario, for example that he is a 32-year-old single man with a good job and salary, and then he has to determine how he will spend, save and budget his money. “The first reaction might be to buy a new Mustang, but then he has to budget for car and insurance payments along with rent, groceries, taxes, meals out and other expenses and savings.”
A long-time Mission Fed partnership with Girl Scouts San Diego promotes financial education through a “Money Madness” Financial Literacy patch scouts can earn by completing requirements that teach them how to make good decisions with money.
“Community involvement is important to us, as well as identifying meaningful opportunities to promote financial literacy,” said Schwartz. Staff is involved in organizations and on various nonprofit boards, which give them the chance to hear what is needed and come up with solutions that make sense.
Building Literacy and Membership
When SkyPoint Federal Credit Union looked at enhancing financial literacy education for the communities it serves, the focus was on high school and college students. “Not everyone has the opportunity or the interest in going to college, so high school is ideally the opportune time to catch young adults before they step out into the real world,” said Audra Pettus, community relations director for SkyPoint. “While algebra and geometry are important subjects, many of us do not ever use these subjects again beyond high school, but do you know what every person needs to know?” she asked. “Knowing how to build credit responsibly, how to create a healthy banking relationship, how to rent an apartment, how to purchase a car and how to budget are critical skills.” If these skills are taught at the high school and college-level ages, a young person can avoid a decade of financial damage and repair down the line, she said.
As Pettus and her team evaluated the types of financial education available, they looked for a different, more engaging way to teach common, but sometimes complicated financial concepts to the young adult audience. “I wanted an interactive platform that would engage students and encourage participation and real-world decision-making,” she explained. After researching and seeing demonstrations of content, marketing and uses of the platforms from several companies, they chose Banzai as their partner.
The interactive platform supplements the five core seminars offered by the SkyPoint staff:
- Financial Wellness 101, which teaches financial basics like having a responsible banking relationship, developing good spending and savings habits, and creating a plan to achieve long-term and short-term financial goals.
- Credit-Building, SkyPoint’s most popular seminar, which explains in detail what information is on a credit report, how a credit score in generated, and how to improve or repair your score.
- Path to Homeownership, which breaks down the steps to take in preparation for becoming a homeowner.
- Life Insurance and Retirement, which places emphasis on the importance of properly preparing and ensuring future security.
- Entrepreneurship, which is a walk-through of completing market research on your product(s) and potential consumers, creating a business entity, and funding a small business.
“We rely on and fully utilize Banzai for popular content outside of our core seminars, including but not limited to investing, filing a tax return and completing a Free Application for Federal Student Aid (FAFSA®),” said Pettus. “All of our four schools have engaged in Banzai by ordering the course workbooks for their students and implementing the interactive digital content into their classroom curriculum.” SkyPoint’s community development staff provides demonstrations and tabling seminars upon request.
The four initial schools in SkyPoint’s Banzai partnership are Montgomery College, Frederick Community College, University of the District of Columbia and Gaithersburg High School. “We concentrated on colleges for our initial sponsorship because they are typically more expensive to sponsor and we wanted to create membership opportunities, which we would be unable to accomplish with high school students due to their age,” explained Pettus. “We also wanted to select schools from our credit union charter areas.”
The Montgomery County high school was selected when a fourth college sponsorship did not pan out. “We researched high schools based on size, graduation rates at 80% or below and demographics, because we wanted to address majority Black and Brown student populations,” said Pettus. “The program launched at Gaithersburg High School in early 2022 with 80 students.”
Engaging Digital Natives
One study shows that 89% of Gen Zers said it’s a priority for them to learn about personal finance, and 75% are interested in taking personal finance classes. While only 36% have ever taken a personal finance class, 38% report receiving financial advice, including long- and short-term savings and budgeting tips from TikTok.3
As credit unions look for ways to reach younger audiences with products and services that include financial education as well as checking and accounts with low balance requirements and no fees or credit cards for those who are still in school, it is important to evaluate technology that connects the credit union with younger generations.
“Digital services are critical to reaching and maintaining this audience because it is their way of life,” said Pettus. “Technology is how they learn, how they connect, how they socialize and engage, and how they conduct business. Gen Z does not and will not bank in the same manner that Gen X banks.” She added, “They open accounts online, apply for credit online, and get their banking tips from social media, apps, and online ads. So, it is imperative to meet them where they are to provide the proper tools, resources and information to equip them for good financial decision-making.”
NCUA provides resources to aid credit unions with enhancing financial literacy for all ages and all communities, but Harper noted that one area that presents the greatest opportunity for credit unions to fill the gap is the education of the young adult population. Credit unions can look to the NCUA’s YouTube channel for shareable videos that are short, to-the-point and provide actionable tips. “[Young adults] experience their first job or move away from home to attend college, and are making financial decisions for the first time,” he said. “If they know how to access financial institutions and know how to make these decisions, they’ll make fewer mistakes.” He added, “And, if they do make mistakes, they will be able to recover more easily, learn and make better decisions in the future.”
NCUA Initiatives to Watch
NCUA’s Advancing Communities through Credit, Education, Stability and Support (ACCESS) initiative is one way the agency is working to assist credit unions on their quest to provide financial services and financial literacy resources to communities across the country. “Board Member Rodney Hood started the ACCESS initiative, the basis of which is focused on how to provide more services and better services to the unbanked and the underbanked.” Harper explains one of the goals of the initiative is also to help credit unions understand how they can remain competitive and to make a credit union charter easier to obtain.
“We’ve just announced that we are shortening the amount of time and the number of steps it takes to get a credit union charter,” said Harper. “We’re also looking at how to change field of membership rules to allow credit unions to serve more members.”
NAFCU is supportive of legislative efforts to expand credit union field of membership to underserved areas and has urged Congress to act on it.
“Far too many Americans are unprepared for an emergency financial need,” said Harper. “As an agency, as a society, as a credit union system, we need to help Americans understand why they need reserves and help them to figure out how they can build them. Credit unions can help members get those basics for their financial lives and need to help them get it earlier in their financial life.”
National Financial Educators Council National Financial Literacy Test Results. https://www.financialeducatorscouncil.org/national-financial-literacy-test/
Smith KA. These States Now Require Students To Learn About Personal Finance. Forbes. April 1, 2022. https://www.forbes.com/advisor/personal-finance/states-mandating-personal-finance-in-school/
Tallo. Tallo Data: Generation Z + Personal Finances. March 11, 2021. https://tallo.com/blog/tallo-data-gen-z-personal-finances/