The Business Case For Investing In Financial Literacy Programs For Members

We all agree education is vital to success in life. Yet consumers may not realize that applies as much to managing personal finances as to any other area of our lives.

That's why financial literacy-understanding how money works and how to manage it properly-is so important to consumers.

It's also a core value for credit unions, where the cooperative business model means every depositor is a member and owner of their credit union. That makes promoting efforts to educate members a smart business move for credit unions. A small investment in member education today can yield big returns, or prevent large losses tomorrow.


Avoiding Costly Mistakes

Educating consumers can help them avoid unwise financial decisions that get them into trouble and, instead, make choices that will reinforce their financial security. A small expense by credit unions can mitigate the costly mistakes of members that ultimately cause delinquencies and charge-offs.

Therefore, financial literacy is an issue that affects the bottom lines of consumers and credit unions.


Building Loyalty

Education is also a way to build loyalty among members and create deeper financial relationships by creating greater awareness of the inherent value of credit unions. It can help a credit union do a better job of reaching underserved markets and targeted consumer audiences, particularly low- and moderate-income households.

Education to promote savings is one example of how to build loyalty. NCUA encourages consumers to develop effective savings habits in order to reach their financial goals. As I emphasized in a recent NCUA Consumer Report video, "Your Financial Future is Brighter with Savings," regular savings is essential to wealth creation and stability. To enable members to reach this goal, credit unions provide a safe place for savings, low-cost financial products and member-focused service.


Promoting Growth

We have recently seen a growing awareness of the differences between credit unions and other financial services providers. Through education, credit unions have attracted new members and grown existing relationships, which has been a key driver in credit union growth.

During the last year alone, America's credit unions experienced record earnings, grew assets to more than $1 trillion, and added more than two million new members. Now that credit unions have attracted these new members, promoting financial literacy is the logical next step.

Educated consumers find safety attractive when they are choosing where to conduct their financial business. Therefore, I take every opportunity to remind consumers that deposits in federally insured credit unions are 100% safe. Not one member of a federally insured credit union has ever lost one penny of insured savings.

And we are now working to expand access to credit unions' financial literacy programs in low-income and underserved communities. NCUA's Low-Income Credit Union eligibility initiative provided greater access to credit unions for nearly one-million consumers in 2012. Technical assistance grants and loans from NCUA's Community Development Revolving Loan Fund assist low-income-designated credit unions with providing products and services including financial literacy programs, in-school credit union branches, and community partnerships.


Gearing Up for Financial Literacy Month

NCUA realizes consumers' power to protect themselves, and build a sound financial foundation for a secure future, is directly related to their level of financial literacy. That's one of the reasons we are gearing up consumer education efforts for April's Financial Literacy Month.

NCUA is rolling out more than two dozen pages of new content and interactive materials this month on our consumer websites: MyCreditUnion.gov and Pocket Cents. We will be highlighting the updates through a webinar for credit unions, educators, parents, and anyone interested in learning more about these free financial literacy resources. Our Twitter feed for consumers, @MyCUgov, will feature daily tips designed to help individuals make smarter financial decisions. I encourage credit unions and their members to link to these resources and tap into them.


Remaining Committed Year-Round

Even after Financial Literacy Month concludes on April 30, NCUA's responsibility to facilitate financial literacy continues year-round-and it's a responsibility we take very seriously. NCUA is an ongoing member of the interagency Financial Literacy and Education Commission (FLEC).

While NCUA's top priority is to protect the deposits of 94-million credit union members, we remain committed to providing financial education so consumers build their savings and achieve their financial dreams. Promoting financial literacy, capability and empowerment among credit union members is key to that commitment. The many resources NCUA has developed and devoted to financial literacy are part of the credit union industry's collective responsibility and philosophy of "People Helping People."

Together, our efforts keep the credit union industry safe, sound and secure.

Debbie Matz is chairman of NCUA.