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Financial literacy is not one of our nation’s strong points. Our current financial crisis resulted from consumers’ biting off more than they could chew–whether it was a mortgage, a consumer loan or credit card debt. Unfortunately, the perils of this crisis might not be enough to end the problem of financial illiteracy since many adults are still not teaching their children-the next generation whose mailboxes will soon be stuffed with credit card applications-about lessons they have learned. While it is evident that headway is slowly being made to improve financial literacy, credit unions must also take action by providing members with the information needed to make the right financial decisions. Financial literacy helps members and the credit union. Financial education will naturally promote member loyalty, assert credit unions as members’ financial institutions of choice and help credit unions determine which members are best suited for various products and services based on their financial and life goals. Credit unions should regularly provide members with practical content on financial best practices. Such information is important for educating members on a number of critical items including, savings, retirement, building an emergency fund, loan and investment products and more. Learning about these kinds of personal finance best practices represents a public priority. When credit unions educate members on personal finance, they also build partnerships. Instead of simply acting as a depository, credit unions become trusted sources of information that members reference to make important financial decisions. Proactive education can be used by credit unions to help to build members’ trust. Members will appreciate the fact that their credit union is providing them with helpful information-not simply sales pitches that often characterize other institutions’ customer outreach. Education is also important when it comes to winning over the Generation Y segment. This demographic will be most receptive to educational content as studies have shown that a majority of Gen Yers are not comfortable making financial decisions on their own due to a perceived lack of financial information sources. Reaching this generation, which is already shown to be more trusting of credit unions than large banks, is an excellent growth opportunity as this segment is expected to account for more than 40% of online banking households by 2014. Further, by proactively taking measures to improve members’ financial literacy, credit unions establish themselves as members’ financial institutions of choice. It is important that credit unions act quickly and implement financial education initiatives, as large banks have already started. The last thing credit unions want is to be perceived as being behind the curve. In the current economic environment that has emphasized the need for improved financial literacy, credit unions have an opportunity to address a major social issue and provide members with the information they need to successfully navigate today’s financial waters. Credit unions can help members while simultaneously promoting member loyalty, establishing their credit union as an institution of choice and more accurately identifying cross-selling opportunities.

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Peter Westerman

Dig Deeper

Credit Union Times

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