Teaching Smart Money Management: Simple is Beautiful
(And it Probably Works Too)
The foundation of any financial literacy campaign is clear goals, not fancy presentation
By Laura Enock
CUES' Credit Union Management's Web-only "Teaching Smart Money Management" column runs the second Tuesday of every month.
It's time to simplify.
Gone are the days when everything had to be cool. OK, maybe those days are not gone, but if we don't get back to the essentials of financial literacy, we are going to drown in a red ocean of mascots, YouTube videos, and events that teach members about how much fun finance can be without doing too much more.
Am I recommending that you cancel all the fun things having to do with teaching smart money management? Of course not. And I'm not endorsing that we begin relegating financial education to a black and white classroom either.
What I am saying, though, is that the foundation of any campaign is a set of clearly defined goals. And those goals seem to be fading into oblivion as the tempo increases for cool, cooler and coolest financial literacy presentations.
That's why I love three principles of smart money management, culled in part from The Richest Man in Babylon, an excellent primer for financial education.
Three principles, you say? Am I telling you that all your members need to do is develop three habits and all will be well with their finances?
Yeah, that's what I'm telling you.
A quick disclaimer, though: Simple doesn't necessarily mean easy. While it may sound easy, we all know how difficult it can be to do what we know is the right thing. At the same time, summing it up into three brief rules accomplishes a very important goal: It makes it tangible and puts it within the grasp of every one of your members. It also shows members there is nothing to be afraid of and nothing they can't understand.
Ready? OK, here are the three principles of smart money management:
1. Save 10 cents for every dollar that crosses your path.
2. Get organized and stay organized.
3. Good things come to those who wait. Wait for your money before spending it. This means (gulp!) no debt.
Now, if your members were doing these three things, how much time would you need to spend counseling them?
Probably very little. Possibly none at all.
The power of simplicity is in its accessibility. This applies especially to finance, where many people feel they "can't." They can't understand it, can't do it, can't plan for it. By summing it up and boiling it down to three habits, "I can't" melts into "Hey, of course I can do that!"
A little elaboration on the three concepts. Paying yourself first is probably the most well-known piece of financial advice. It's also probably the least followed. When there are only three rules, or habits, to stick to, it may not be as difficult as when it's one idea among hundreds. This includes the ideas of "invest wisely" and "don't put all your eggs in one basket."
The second habit is getting organized. On the surface, this seems lacking in importance compared to the other two concepts. Yet when all your financial records are easily accessible and you know exactly what is where, and how much you have in each account, you won't overspend because the ATM shows a high balance. You know there are checks written out against that balance. And because you're organized, it's easy to review your finances briefly each week, in more detail each month, and fully once a year. When you do that, you can't pretend not to realize you've already spent three quarters of your paycheck. You'll realize immediately where you are, and naturally cut back on spending until your next paycheck is received. It can be an organic process if we just let it happen. Organization prepares consumers for this type of natural growth.
Then there's the concept of debt. This may be a challenge not only to your member, but to your lending department too. You do, after all, offer home loans, auto loans, signature loans and credit cards. Are you going to advise members not to use them?
There's a difference between collateralized loans and uncollateralized loans. Home loans are OK, and so are auto loans, even though the ultimate goal is to have members pay them off quickly and pay as little interest as possible (you do put your members' needs first, right?). Using your credit card, because it has a better rate than Bank of America's card, is not "responsible use of credit." It's still credit card debt, and credit card debt is a bad habit.
Three habits. Three concepts. Simple? Yes. Easy? No. It's not the be-all, end-all answer. But it's a starting point. It's a way to capture your members' attention and get them to take action. That's something that not all financial education programs have accomplished.
Simple is truly beautiful.
Laura M. Enock is CEO of CUVA and publisher of 80/20 Marketing, a monthly report on credit union marketing, and www.CreditUnionNewsletters.com.
- Go to the current issue of Credit Union Management magazine.