Financial Education is the Right Track for Credit Unions

The most important service of the credit union is the education of its members in the management and control of their own money. – Roy F. Bergengren, credit union pioneer.

What Mr. Bergengren said in the 1920’s is still true today- we as credit unions have the unique opportunity and the imperative duty to offer financial education to our members.

However we must also be continually focused on creating the best return from our members’ resources. While it’s in our very DNA to offer financial education, community support, and creative solutions, we can do none of these things without an eye towards fiscal responsibility.

This is the mental friction from which my project was born- Tracking the ROI of Financial Education. Visit me here for a look at how the project was developed at Fibre Federal Credit Union, and here for other endeavors we are using it to track. Now, let’s look at how we are implementing the program and what results we anticipate.

  • Why do we need it?
    Over the past year, FFCU has taught financial education to nearly 1,000 students. That means we met and impacted 1,000 prospective members. This is a great number, but pales in comparison to the 500,000 students (potential members) that the credit union industry reached as a whole last year. Surely these interactions contribute to a strengthened and expanded membership- and yet metrics to this end are hard to come by.
  • How will we do it?
    We will offer our students $10 for opening a new savings account. This incentive serves several purposes: it provides impetus for students to take action; it rewards responsible behavior; and it provides me with a mechanism for tracking these new accounts. When the accounts are opened they will be coded with a nonrestrictive flag which will allow me to run reports in the future. Should additional family members also open accounts at that time, all will be tracked using the same flag.
  • What will we track?
    Working with our IT department, we are developing a report that will be run quarterly. The report will include the number of accounts open, the income generated by these accounts, and the costs associated with these accounts. We will then compare the revenue generated to the total cost of our financial education program. We can also compare this with our traditional cost of obtaining a new member.
  • What do we anticipate?
    While there is much speculation on what financial education contributes to communities and to the bottom line, there isn’t a fast way to measure this impact. We have to start somewhere, and my process will lay the foundation for credit unions to begin to measure the hard money return of these programs.

    We don’t anticipate this looking overwhelmingly profitable right away. It will take time to build up an adequate sample size, and may look frightfully unprofitable in the meantime. Furthermore, since the average age of student I work with is 16, it will take several years for these members to begin profitable behaviors like taking out loans, making frequent point-of-sale transactions, and the like. We are entering into this process with a long-term approach, and I would caution your credit union against anything less.

If you are wondering if credit unions should offer financial education solely based on profitability, the answer is absolutely not. Community education is a great way to build intangible benefits like brand equity and exposure and decreased average membership age. There are also other benefits as outlined in this article from CU Insight: as we strengthen our membership through financial education, we also increase their financial capability and likely their general engagement with our credit union. By increasing their financial capability, we also increase their potential profitability by improving their knowledge of saving, borrowing, and investing, which can translate into increased POS transactions, higher ability to borrow, lower delinquencies, and a higher number of products-per-member.

The reasons for financial education are many: it’s the credit union-y thing to do, and also shows promise of both short- and long-term profitability through new accounts and increased member performance. Yet credit unions struggle prove this. May my tracking system, in all its infinite simplicity, be an important tool in our collective ability to do so.

Thank you again for your support. Win, lose, or draw, I will fine-tune and share my system with peers in the next few months. Should you be interested in my step-by-step guide, please email me here.

Shannon Cahoon