Financial fear lives in credit unions

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To find out how to improve employee productivity and performance, credit union executives must first ask their employees a general but critical question: what keeps them in the loop at night?

If your best guess in your answer is money, you’re right, wrote Taylor C. Nelms, director of Filene Research, in his new report, “The Case for Financial Welfare in the Workplace.”

It’s not just another study of how credit unions need to provide financial literacy to their employees so they can solve their own money problems. In fact, financial literacy just isn’t enough. Instead, Nelms’ extensive research shows that one of the best ways to increase employee engagement and productivity, as well as reduce revenue and costs, is to offer a holistic mix of programs, services and tools that are tailored to the needs of employees and the company’s capacity is tailored.

In addition to taking the first step in assessing whether employees are making a living wage, some programs also offer employee-sponsored small-dollar loans, hardship funds, income advances, student debt assistance, matching savings accounts, and personalized financial advice and – consultation .

“My goal in writing this paper was really to get people thinking about the business case in order to address the issues of financial uncertainty more broadly,” said Nelms. “I think there are real advantages for credit unions accepting this challenge for their employees and their employees. I think it makes sense from a mission point of view. “

Finally, he raised the question of how employees of the credit union can be expected to help members with their financial challenges when employees are struggling with their own finances. And how can union leaders preach the importance of members’ financial well-being rather than investing in the financial well-being of their own employees?

The financial insecurity of the average American employee has been well documented by dozens of research, government, and corporate research. Economic books and media reports from the last few years.

Some of this research has shown that around half of the workforce across all industries struggles with personal finances and nearly eight million workers live in poverty despite working full-time. In addition, more than a third who make more than $ 60,000 annually and 13% who make more than $ 100,000 also have financial problems.

In addition, the National Credit Union Foundation, in collaboration with the Center for Financial Services Network, now Financial Health Network, measured the financial health of employees of six participating credit unions. This study found that 55% of employees have financial problems. Other studies of employees in the financial services industry have found similar results, such as a study of employees in a large financial services company in which one in five employees reported high financial stress.

These personal financial problems seem to be escalating as these workers have not only missed wage growth for the average worker over the past 40 years, but also bear the rising costs of health care, housing, education and retirement more.

For example, a new study by the Economic Policy Institute found that CEO compensation among the country’s 350 largest companies rose 1,008% from 1978 to 2018. However, pay for typical workers rose a minuscule 12% in the same years.

Additionally, over the past four decades, the risks associated with financial planning, savings, borrowing, investing, and insurance have shifted dramatically to household budgets.

“This transfer of risk is nowhere more evident than in health care and retirement, as employers have shifted from defined benefit pensions to defined contribution plans, and the employee’s share of spending on health insurance and funding benefits has increased dramatically, as well as higher premiums and deductibles Using cost-sharing tools like flexible spending accounts and healthcare savings accounts, ”Nelms wrote in his research report. “In short, workers are increasingly bearing the cost of health care and retirement provision, even as their employers’ benefits are being reduced.”

Although inflation has been tame for years, it has not tamed the rising costs of health care, education and housing, he noted.

“When you have this confluence of rising prices along with stagnant wages of 40 years or more and the transfer of risks to individual households, we are really having trouble with personal finance,” he said.

Of course, there are consumers who make irresponsible or bad decisions about spending money, but research found that most consumers are responsible for managing their money.

Nelms referred to the groundbreaking and award-winning book “The Financial Diaries” by Jonathan Morduch and Rachel Schneider.

The authors tracked the income and expenses of 235 low- to middle-income families over a year and found that the vast majority of them did not have enough cash to pay all of their bills. Recent research over the past three years, including by the Federal Reserve, has found that nearly 80% of working Americans live from paycheck to paycheck and about 40% cannot cover $ 400 emergency expenses, meaning most households only have one paycheck are removed from financial disaster.

“When you actually look at this kind of micro-level data, you see that in a situation that is way beyond their control, people are basically doing the best they can,” he said. “And so, things like turning to a credit card, a friend, a payday lender, are very rational decisions that people make for their particular circumstances.”

What can credit unions do to improve the financial health of their employees?

Provide them with a living wage by increasing their salaries.

“When you’re looking for more bang for your buck, you need to check the numbers and see if it just doesn’t make any difference just to raise your wages because I think it does,” Nelms said. “You could have a direct impact and potentially spend less in the long run just by raising wages.”

To determine if your employees are earning a living wage, Nelms recommends using a living wage calculator, such as the one developed by Amy Glasmeier at the Massachusetts Institute of Technology (, to calculate the cost of living in your community or region Be Estimated provides a wage rate that enables residents to meet the minimum standard of living.

According to Filene’s research, market comparisons of wages and official poverty thresholds do not always provide accurate measures of the resources households need to make ends meet, as they usually do not take into account differences in family composition or the cost of childcare. Transportation and other necessities. Additionally, credit unions should offer a strong mix of benefits, including paid time off to care for a child or older family member, as it provides employers with financial stability at a negligible cost to employers, Filene said.

One of the most successful programs that employees can use to make ends meet is the employee-sponsored small loan program.

Rather than using traditional credit ratings, employees with reliable work records are automatically approved for loans of up to $ 2,000, typically available within 24 to 48 hours. The interest rates are lower than payday loan providers and the ESSDL loans are repaid through the wage deduction.

The ESSDL program was developed by the United Way’s Working Bridges Employer Collaborative in Chittenden County, Vt., And funded by Rhino Foods and the $ 641 million North County Federal Credit Union of South Burlington, Vt.

Filene tested the ESSDL program with 48 employees and 13 financial institutions in eight states and granted more than 1,000 loans totaling $ 1.2 million. The loss rates reported during the Filene test ranged from 2% to 3%.

To attract young talent, credit unions should consider student loan repayment plans. The $ 1.5 trillion debt burden for students is borne primarily by younger and colored people, which limits their ability to spend, invest and save in other areas. Filene’s research found that 90% of 22- to 33-year-olds would commit to a job for five years if they received help with their student loans.

While Filene’s research has identified a number of other benefits and programs that can help employees stay afloat financially, it is important to first identify the specific needs of your workforce, as a credit union’s employees have a wide range of financial needs and challenges and have different attitudes towards money and its management. Credit unions can gather this information through anonymous surveys, focus groups, interviews, and an in-house advisory group.

In order to determine the current financial situation of your employees and determine which programs and benefits best fit their needs, Filene recommended a three-part anonymous survey that measures the current financial well-being of employees and the value in use and usage of your current benefits and programs Being Evaluated offers and asks employees to determine which benefits and programs best meet their needs.

Filene recommended starting with the CFPB’s free online, ready-to-use questionnaire and considering working with an experienced partner who has a proven track record of helping organizations develop benefits and programs to help employees achieve financial wellbeing.

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