I read a terrific story in the Wall Street Journal recently that focused on state and nonprofit programs that encourage low-income Americans to start saving. It detailed how if given the chance, the education, and a little help, those of modest means can save and achieve things such as getting out of debt, home ownership, and saving for retirement. Yes, low-income Americans can save, they can set and reach financial goals. Any financial advisor will tell you even a small amount of savings each month can go a long way to financial security with the elements of time and compounding interest at work. We hear all the time that Americans are terrible savers and that this could equate to some sort of financial catastrophic event somewhere down the line. It turns out, not surprisingly given their financial challenges, the worst savers are the low-income. According to the Federal Reserve, only 13% of the bottom 20% of America has a retirement account. When it comes to middle-income America, 53% have such accounts and the percentages go up the higher the income levels. There is a good chance that low-income earners do not have jobs that offer a 401(k) or profit sharing plan, so they are on their own on the savings front. So what does it take to get the low-income to save? Education. Nobody wants to walk into class not knowing anything about the subject matter. If you are not educated in financial matters, it could seem daunting to try and get in the game. Just look at the acronyms that we often see in financial promotions. IRA, Roth IRA, 401(k), IDA, HSA. what do they all mean? OK, so where is the credit union angle here? First, helping those of modest means is top of mind right now for the industry as bankers continue to publicly criticize credit unions for not serving this segment. Congress also may be looking for proof of this going forwarded, and NCUA may try to regulate this one day. Credit unions can become the financial educators that help those of modest means start achieving financial goals. This is no revelation. In fact, credit unions are doing this all the time. I am inundated (happily so) with press releases that talk about credit unions holding free financial education seminars, offering free financial advice, and on and on. Some credit unions are helping those with poor credit by offering them low-cost loans that require them to save a portion of the loan each month in a savings account (and even matching those funds). These are all good things and we know they are going on all around us. Credit unions aren’t doing these things to beat back banker attacks or satisfy Congress, they do them because they believe in helping better members’ financial lives. The problem is these things may not even help credit unions on the documentation front. I recently had a long talk with a high-level trade association leader who said finding a formula to document how credit unions are serving those of modest means is proving incredibly challenging. What benchmarks do you use? We saw how banker groups used Home Mortgage Disclosure Act data to make credit unions look bad in lending to the low-income, yet credit union groups were able to turn that around. Even if you can show that credit unions serve underserved areas, what numbers will credit unions tout? Will it be the penetration of low-interest loans to this segment? Will it be showing how a credit union gets none or very little fee income from this segment because it offers fee-free products? Financial education is great, but that is difficult to document statistically? I don’t know what Congress or the regulator would look at to show credit unions are doing their part. But back to the Wall Street Journal story. It quotes experts saying that the biggest difficulty with getting low-income Americans to save is convincing them they can do it, getting them to buy in. The story cites a Pennsylvania state program designed to encourage savings. This particular program provides some level of matching funds for funds the low-income individual saves. I bet the state can provide data on that program, how many people have opened accounts and how levels of savings have risen. And then it hit me. Why not forget all this talk about complex formulas and benchmarks to document how credit unions are serving those of modest means. Why not hit one, very well-known area of financial health – savings. Everyone in Congress has probably heard about the country’s miniscule savings rate. That’s a great white hat topic, and fits with the credit union philosophy. How do you document it? Keep data on Roth IRAs opened for low-income members. Credit unions can hold Roth IRA workshops, continually educating members so those Roth IRA numbers keep going up. Credit unions can tell Congress, `we’re helping low-income Americans save for retirement’. The single parent making $30,000 has a Roth IRA they never had before. What a great message and a great thing for credit unions to pursue. Also focus on Individual Development Accounts, which are geared for those of modest means. How many has your credit union opened? Show how the balances in these accounts are rising. And then there are Health Savings Accounts. The bottom line is these accounts could easily be counted, documented and held up for scrutiny. I think the message of savings can save credit unions in this ongoing documentation battle. Comments? E-mail [email protected]

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