By Laura Enock

Jan. 13, 2009

Credit Union Management's Web-only "Teaching Smart Money Management" column runs the second Tuesday of every month.

I love writing for CUES.

Not only do I get to spill my guts all over the screen every month, but I get to hear from some very interesting and very smart credit union leaders.

Take the article on whether or not financial literacy efforts are working. It generated a lot of comments, and some complaints too. No surprises there. When you've put time, effort and resources into something as important as financial education, you like to know that it's working. But when it's put under a microscope and you don't see what you expect, well, it's somewhat disconcerting.

But one complaint really hit home, and that was the fact that I raised questions without answering them and discussed problems without offering solutions. CUES member Rob Givens, CEO of Mazuma Credit Union in Kansas City, was kind enough to say he appreciated my bringing up the problems and didn't expect a solution to be forthcoming so quickly. Rob has lots of great ideas and he's put a lot of thought into financial education. Mazuma CU is working with a vendor for the financial education part of its Web site, Educated Investor, that focuses on results-based financial education. And yet, those who need financial education the most are not receiving that outcome. This means their behavior remains the same despite the credit union's best efforts.

Assuming (as I and many others do) that the goal of financial education is increased financial responsibility; meaning more responsible use of credit, more savings, smarter spending and budgeting, then classroom-type learning isn't necessarily going to accomplish that goal.

So here's one possible solution. If you'd like to try it, or have already tried it, in your credit union, I'd love to hear from you. This is definitely not the whole solution, but it's certainly a start.

Increase financial literacy through the products you offer at the credit union.
Before you say, "But how can an auto loan or a credit card teach people how to better handle their money?" let me tell you what I don't mean by using products as an educational tool.

Recently, a large credit union announced it was helping teens learn about money by giving them a Visa debit card to use during the holidays.

Huh?

Did I miss something here? Are we talking about the same goal? Introducing teens to the pleasures of plastic by pushing a card on them is going to teach them to spend less, save more, and budget better?

What good is there in giving teens their first credit card and getting them used to the idea of buying now and paying later? Even if it's a debit card, the further they are removed from the money they earned (or were gifted from mom and dad?), the easier it is to get used to swiping a card instead of counting out bills. This just opens the door to a buy now and pay later outlook on life. The mall becomes an irresistible playground.

And yet, the concept of approaching financial education not as a classroom-based or book-based "education" initiative, but a hands-on, real-life product-oriented program makes a whole lot of sense. So the question becomes what products will people (kids, teens, adults) want and use, and which will actually help them absorb the messages we've been trying so hard to teach?

How about a savings account that rewards teens for setting a budget and putting aside 10 percent of their income? They can report all income earned by babysitting, mowing lawns, walking dogs, or whatever, and 10 percent of all their income goes into a savings vehicle. They can spend the rest. Some kind of points or rewards system is put into place, and bingo! You've taught them to save.

What about the hard-working adult who is living paycheck to paycheck and is sometimes not making it to the end of the month? What kind of product can help him avoid payday lenders? Well, if you can offer an incentive for putting 10 percent into a savings product off the top, and maybe offer more points for having something left (whatever amount you set) from one paycheck when the next one is deposited, you may have motivated him to use a budget.

Of course, the financial education classroom learning component should be there. But in order to get your members to use it and, more importantly, to get them to want to use it, find or create a product that gets the message to them in a way a thousand textbooks never would.

So back off. Stop trying so hard at financial education. Of course, you can always use my fun articles at the soon-to-be released www.CUcontent.com to make some quick points about financial literacy and (especially) financial responsibility.

But most of all, come up with products that help your members achieve the goals you want them to achieve. Like most processes, the natural, organic way may just turn out to be the best. Provide the framework and let your members reach a new level of financial education on their own.

Laura M. Enock is CEO of CUVA and publisher of 80/20 Marketing, a monthly report on credit union marketing, and www.CreditUnionNewsletters.com.

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