It's Up to Us to Improve Financial Well-Being
Almost half of Americans couldn't come up with $400 to pay for an emergency. Yes, you read that right – half.
Last year, the Federal Reserve published its Survey of Household Economics and Decision making (SHED Report). The Federal Reserve notes, “To determine individuals’ preparedness for a smaller scale financial disruption, respondents are asked how they would pay for a hypothetical emergency expense that would cost $400 ... 46% indicate that such an expense would be more challenging to handle and that they either could not pay the expense or would borrow or sell something to do so.”
These Americans are your members and potential members. We can't wait any longer to act on this and appropriately, April is National Financial Capability Month. “Financial capability” is kind of a wonky term, so what does it mean, particularly for credit unions?
According to CFED (cfed.org), financial capability is a critical step on the road to financial well-being. “Financial capability is the capacity, based on knowledge, skills and access to products and services, to manage financial resources effectively. To experience financial well-being, CFED believes it's critical to build financial capability over time. Financial capability is not an end unto itself. Rather, it's a stepping stone to future financial wellness.”
As a movement, we tend to focus a lot on financial literacy, which is great, but as you can see, financial literacy is just one piece of the capability puzzle. You also need access to safe and affordable financial products at the right time. Of course, building strong financial skills and habits early is critical by working with children, youth and parents.
We at the Foundation are already working on this in our role as a catalyst in the movement. Aside from our many programs for credit unions and leagues in the areas of financial literacy and financial well-being, we recently approved five credit unions to fund consumer financial health assessments with the Center for Financial Services Innovation.
CFSI is one of the leading organizations dealing with the subject of consumer financial health. CFSI's Consumer Financial Health Study found that 57% of Americans are financially unhealthy, which means they lack daily financial systems that serve them well, struggle to weather financial shocks and are not well-positioned to pursue their financial aspirations.
Over the next year, grantees will be leveraging CFSI's financial health check-up methodology to help assess the status of members’ and employees’ financial health to provide insights credit unions can leverage to help improve member financial well-being.
Understanding members’ financial health and members’ day to day financial struggles are key to helping credit union management, staff and board members pursue initiatives to help more members improve their financial health.
Credit unions were started to help those who needed us most. We need to get back to our roots to build the financial capability of the 46% who couldn't come up with $400 in an emergency or the 57% who are financially unhealthy. It's up to us.
Gigi Hyland is Executive Director of the National Credit Union Foundation. She can be reached at 202-824-6282 or firstname.lastname@example.org.