By Robbie Wright
Quick, name the marketing campaign that encourages your members to save money…
Can’t think of it? Neither can I. Most CUs aren’t actively assisting their members in saving their hard-earned paychecks.
Now, there are some exceptions to this rule. Boeing Employees and Spokane Teachers are two great examples. BECU calls their program Member Advantage and they currently pay 7.50% APY on the first $500 of savings in selected accounts. STCU has a similar program currently paying 6.14% APY on their First5 account.
Both of these innovative credit unions are encouraging people to take that first step. And many times, that first step of setting $10, or $100, per paycheck away is the most difficult thing to do. Think of ING Direct and how easy they’ve made saving. Whatever amount, and nearly whenever they want, our own members transfer their money out to a high-yield savings account to save it for a rainy day. If they don’t see it frequently, it is easier to forget about, just like that money under the mattress. How much is your CU losing each month to ING? If you don’t know, you should.
Our members want that rainy day fund. They want the emergency account to float them through 3 to 6 months of unemployment. We don’t even have to pay those above-market rates. We just have to make it easy! Many online banking platforms support scheduled transfers, nicknaming accounts, and even hiding accounts from being seen. But how many members know about that functionality? Sometimes advertising things we already have works the best.
The IRS has even jumped on the bandwagon of helping people save. For the 2006 tax year, the IRS has released Form 8888. The new form will let your members direct deposit their tax refund in up to three different accounts, even at different financial institutions of their choosing. I grew up with the old motto of “spend half, save half.” The new IRS form is the perfect tool to use to help credit union members do the same.
Since the beginning of 2005, the U.S. personal savings rate, or PSAVERT as the Federal Reserve calls it, has been negative. Our members are enjoying the newfound equity in their homes and using it to finance the flat-screen TVs, college tuitions, new SUVs, and granite kitchen countertops they wouldn’t normally be able to afford. Once the housing market regains some equilibrium, our members will have to pay for things the old fashioned way: by saving for them.
Many people find event-based savings an easy way to sock money away. Being newly married myself, my wife and I want to set some money away specifically to go honeymooning again, or just on vacation. Christmas was just here, but before you know it, we’ll be eating turkey again and thinking about buying all those Christmas presents. Many CUs have vacation clubs, Christmas Clubs, and other similar accounts, but most aren’t flexible enough. Can you open them on line? Do they get a good rate? Most don’t have either.
One of Filene’s recent projects is prize-based savings, where members get rewarded in a lottery-type system for saving their money. You could give away a new washer and dryer, $10,000, or a computer. Whatever the prize, members find it easier to save when they have a chance of winning a prize. Imagine if some members bought that $1 lottery ticket every day. Instead of 1-in-a-gazillion chance of winning $100 million dollars, they had 1-in-a-30,000 chance of winning $10,000, and they got to keep their $1-a-day as well?
Every year, the magazine Fast Company does their “Customers First Awards.” In 2005, Intuit, the makers of QuickBooks and Quicken, received the Listener Runner-up award. Way back in 1989, they began using ethnographic research to build improvements into their software. They didn’t use focus groups to ask their customers what they wanted. They didn’t survey them either. Rather than having all the brainpower in the company sit in meetings and dream up new stuff, they watched their customers. They sent engineers out to observe how people used their software and how they could make it better.
You don’t need to have another vacation club account, a high yielding Christmas club account, or even an online-only high rate savings account to help your members save. Simply listen to what your members are saying. Your members are speaking to you every day in how they spend their money, where they transfer it to, and how they save now.
The greatest savings innovations won’t come from redesigning existing products. The greatest ideas will come from watching, listening, and speaking with your members and developing the products that will help them the most.
Check out Robbie Wright's blog, The Life & Times of a Credit Union Employee.
Read about one credit union's experiment with prize-based savings.
Read Tax Prep Partnerships an Entree to Unbanked Consumers in the Skybox archives.
