Credit Unions Primed to Help Young People Save More
MADISON, Wis. -- There's plenty of room for credit unions to move around when it comes to helping young people save more.
"Just offering a plain-old savings account is not going to float the boat for many consumers," said George Hofheimer, chief research officer at the Filene Research Institute. "Credit unions can and are doing a lot of interesting things. They need to identify those key saving moments" in a person's life.
For instance, while many credit unions are offering tax preparation services, many more can develop avenues that would encourage starting with tax refunds to build a savings nest egg, Hofheimer said. "Default" or automatic 401(k) plans could be another way for credit unions to help younger people save more, he added. Filene is currently working with an Indiana credit union and a professor from Harvard University to develop a "prize-based savings product" where for each dollar or incremental dollar deposited in a specially designated account, the member earns an additional entry into the sweepstakes drawing. The more deposited, the greater the chances of winning.
Hofheimer is not so quick to scold young people who are saving less. He acknowledges that while there are a "certain amount of consumers who are spending beyond their means," fixed expenses such as housing, insurance and college education, which for many, means student loans, have gone up dramatically.
"It's not like people are spending willy-nilly," said Hofheimer. "We have less disposable income than we did years ago. There is a larger proportion of our expenses that are fixed."
Many credit unions have already taken the lead to encourage saving among younger members. For instance, the $6.5 billion BECU recently rolled out its Member Advantage account, which carries a 7.50% annual percentage yield on the first $500. An Early Savers account targets those 18 and younger with the same APY.
Hofheimer said he's encouraged about the number of public policies that have launched campaigns to help young people build assets and stave off debt.
"People are really scrambling to keep ahead," he said. "An unexpected event like losing your job or getting sick can push a family over the edge." --firstname.lastname@example.org