9 minutes
Reach younger members with hands-on financial education, great digital tools and your mission.
Let’s face it. Checking accounts are for grandmothers. The last things many young people want from your credit union are an ATM card and a checking account. But as young people navigate everything from mobile payments to buy now, pay later and “get paid early” offers, it’s little wonder that some of them get lost trying to manage their money and struggle on the road toward traditional objectives of successful personal financial management, let alone personal financial wellness.
Like driving a car, personal financial management is one of those skills best learned by doing. But when it comes to lessons on how to manage money, school offerings can be hit or miss. According to the Council for Economic Education, seven states added a financial literacy education requirement in 2023, bringing the total to 30. But of those 30 states, only 16 require a stand-alone personal finance course with a dedicated curriculum. In addition, only 1 out of 4 millennials demonstrate basic financial literacy.
Critics question the quality and effectiveness of many school programs because, they say, financial management skills can be difficult to acquire abstractly and are best learned with real money. Today’s video game generation knows they can drive a simulation off a cliff and just click “restart” but being in control of your finances means no painless do-overs. School programs sometimes suffer from being too reliant on rote learning and hypothetical funds with little or no training behind the wheel.
In central Florida, Addition Financial Credit Union gives young people a learn-by-doing opportunity with high school branches that are physically operated in the schools exclusively by the students. A qualified advisor consults with students behind the scenes but is not directly involved in branch operations. Some of the students who run the in-school credit union branch are also engaged as summer interns by Addition Financial CU, where they are exposed to lending and collection departments, giving them first-hand exposure to the real-world impact of credit scoring.
“It doesn’t matter how many times we’ve told them; it sinks in when they see it in action,” says CUES member Kevin Miller, CCE, president/CEO of $2.8 billion Addition Financial CU, based in Lake Mary, Florida.
Most high schoolers don’t qualify for a credit card under normal circumstances, so Addition Financial CU also offers a student credit card built on a shared risk model. The student member pledges a small sum, and the credit union matches with a credit limit that might be two to three times the amount pledged by the student member.
Miller concedes the credit union takes on much of the risk, but Addition Financial CU requires the student to “have some skin in the game with us, which means you’re looking out for how it impacts you.” The same students who run the in-school branch also use the know-how and insights they’ve learned to lead workshops and training sessions for their peers. Miller says this peer-to-peer money management advice has credibility and relevance to students who might be dismissive of what could be perceived as nagging from the older generation.
Addition Financial CU’s high school branches also had to overcome some skepticism from those who questioned if “kids” could be trusted to play with real money! The credit union operates high school branches in communities representing a wide range of economic demographics. Miller says that care is exercised in choosing the students who staff the in-school branches, but they have been extremely successful and have had no issues or losses associated with youthful irresponsibility or immaturity.
Exemplifying the success of the program, Addition Financial CU has been able to transition program graduates into full-time credit union employees. Upon graduation, Miller says that the skills and knowledge gained by school branch experience teach skills that are in high demand by local hiring managers, sometimes including competitors of the credit union.
Financial Structure and Tools
Financial literacy curricula in schools give students early exposure to structuring money matters into concepts such as accounts, budgets and savings. Experts agree that without creating structure, the member’s capacity and resources have little bearing on financial wellness. Although some may use the terms interchangeably, “financial education and financial wellness are not the same thing,” says Carrie Stapp, SVP/marketing at PSCU/Co-op Solutions, a CUESolutions provider based in St. Petersburg, Florida.
“Financial wellness really is the actual actions that we take to make ourselves financially sustainable according to our own definitions and our own goals. Your definition of financial wellness is different than mine,” Stapp says.
While it is helpful to provide learning opportunities for consumers to manage their money more effectively, even the best financial education program isn’t enough if it isn’t supported by an apparatus to make sense of daily activity. “What’s really important for credit unions is not just educational tools, but the daily tools and the long-term tools that they must provide their members in order to help,” according to Stapp.
Those tools are most likely going to come from helping younger members manage their money on a handheld device using a tap, drag and drop user interface. They want on-the-go access that supports storing and transferring funds, paying bills and splitting the lunch check.
While many credit unions offer basic functions in a mobile app, these members in many cases want more and are increasingly relying upon the mobile app to help them behave well—much like modern cars have added adaptive cruise control and lane departure warning systems that add layers of safety and convenience to driving. Some finance apps reward progress toward financial goals and discourage impulsive spending.
Consumers increasingly seek access to apps that will aggregate their account data in one place, offer budgeting tools and erect guardrails against temptations. They have apps that count steps and track calories on their watch—they seek the same immediacy to track spending, net worth and credit scores.
Fintechs see this and are investing now to attract the same consumers that credit unions seek. “They’re getting people into their web and getting the transactions and getting the utilization. And now when I log into my PayPal, they’re offering me additional products and solutions and they’re starting to offer me dashboards and those types of things,” Stapp says.
From Share-Drafts to Interactive Digital Solutions
Fifty years ago in 1974, the credit union share-draft account was born. Imagine the competitive disadvantage credit unions would have faced without a checking product. A shift in consumer preferences away from traditional financial institutions to fintech platforms could once again threaten the fundamental purpose of the credit union account.
“It’s hard enough to compete against the community bank or the credit union down the block. How do you compete against Venmo and Apple Pay?” asks Parker Graham, founder/CEO of Finotta, a personalized financial guidance platform provider.
Interactive digital solutions can allow credit unions to deliver positive reinforcement for good financial behavior. Coaching, personalized recommendations and a reward structure that quantifies progress toward goals with points and badges are all parts of the “gamification” of Finotta’s platform, giving it strong appeal to a generation raised on video games.
If mobile apps and digital wallets are the future, it becomes critical that the credit union be in control of those offerings. Consumers may have multiple account relationships, but they will probably only use one banking app.
“The explosion of ecommerce, explosion of digital banking technologies, explosion of things like buy now, pay later, taps and swipes, and subscription payments is causing disaggregation, leaving consumers to feel less and less secure in their financial wellness,” says Stapp. “Where the opportunity is for credit unions is to bring that aggregation back and focus on financial wellness tools that help members get to those long-term goals.”
The Resource Challenge
The challenge to credit unions to successfully compete in this arena is considerable, as fintechs and big banks invest multiple millions of dollars to capture users while the average credit union tries to keep current with technology along with all their other operational efforts.
“Credit unions have a lot of problems they have to solve with limited resources, then they have to be just as … good at handling the digital side, and that’s a tall order,” Graham says. He says credit unions know that they need these tools but fear of making a mistake with new and unproven platforms can cause decision makers to hesitate, resulting in delayed adoption and the potential to be left behind.
“Sometimes late adoption is okay, but often the member has already moved on to a provider that does offer them these features and convenience,” he adds. “Credit unions don’t have to be cutting-edge, but they have to be able to move faster than what is typically a year-long sales cycle for a credit union. Because a year later, that member has moved on and that technology might be irrelevant, now you’re two cycles behind.”
While fintechs and big banks may have an advantage in resources and spending power, credit unions aren’t without leverage to retain existing members and attract new consumers.
“Credit unions start with a ton of equity in terms of trust,” says Stapp. “They’re very, very trusted in that sense, where the fintechs aren’t. Fintechs are trusted more in terms of their capability, but not in trusting that I’m doing the right thing for you. I think that’s a huge coup for credit unions—why am I choosing you for financial wellness if I don’t even know you?”
Graham agrees.
“Gen Z and millennials are very mission-driven people, and if you tell the credit union story to them, it will resonate,” he says. Graham thinks young people would prefer to choose a credit union “but the technology gap is way too big for them to operate with. If you can close that gap, you have a fighting chance,” he says.
Just like healthy eating, our financial health is highly dependent on the day-to-day choices we make. You can’t lose weight by reading diet books, and good habits are developed by practicing not studying. It’s almost always better to start young, rather than undo bad choices.
Modern consumers are socially aware and can be attracted to the credit union story, but only if the credit union can deliver on its member advocacy promise with the digital financial management resources and tools that are increasingly perceived as essential—just as essential as Grandma’s checkbook ledger once was. cues icon
Longtime credit union advocate Keith Kasmire lives in Virginia.
