Flunking Out

CORONADO, Calif. — With the average American (including CU employees) scoring an "F" in Financial Literacy 101, there can be bottom-line benefits to improving that grade, according to two experts.

Much of the current recession has been popularly blamed on greed, but "there were also a lot of people not understanding what they were doing," observed Joe Saari, CEO of Precision Information, a provider of financial education content.

Saari, along with Becky Nilsen, CEO of Desert Schools Financial Services, a CUSO of Desert Schools Credit Union, shared with Credit Union Journal's Grow Show how credit unions have used financial education to bolster their growth.

Saari noted that the average American scores 55% in tests of basic financial literacy.

"Two-thirds of consumers say they don't know enough to make a sound financial decision; 70% of people say they want more basic information," Saari said. "They aren't particularly interested in portfolios or capital/asset models. Eighty-four percent of consumers and 84% of your employees, say they want their employer or the company or individual with whom they are going to do business to educate them in the process."

Precision Information provides educational content to credit unions to be used in educating members and training employees. Internally, noted Saari, any employee going through a foreclosure, for instance, does not leave that problem at the home they may be about to lose.

Saari said Americans aren't dumb about money-they are overwhelmed by the number of products and services available, and typically receive very little education on finance.

Three years ago, said Saari, his San Diego-based firm began working with a group of 25 to 30 credit union execs examining the issue of financial literacy and how it affects the CU. A baseline survey found CU employees also scored 55% on a financial literacy, discovering in the process that the area of the CU in which the employee worked and the number of years of employment did not affect the score. After taking a course, the average score was 82% among employees.

ROI from financial education is generated internally, according to Saari, through increased employee productivity and morale and a resulting more effective sales/service culture. Externally, ROI comes from the ability to attract new/stronger member relationships; new sales and service opportunities, and the ability to serve under-served markets more efficiently.

"The group of CUs that has invested in education has seen 14.l71% growth in assets and ROA of .72%," said Saari.

As an example, he pointed to the $352-million Mazuma Credit Union in Kansas City, Mo., which tied financial education efforts into some of its marketing efforts. It has a rotating feature article on its website, and offers an online Money Coach and a Financial Well Being Skill, the latter an eight-question quiz to determine level of stress. Nearly 3,200 members have interacted with the financial education resources, providing more than 50,000 page views. Saari said his company has delivered 800 hours of online training at a cost of about 25 cents per person.

Nilsen, of Desert Schools Financial Services, which provides insurance, investments and estate planning to 10,500 members with a team of 30 people. It had $55 million in sales, generating $3 million in GDC in 2008.

"Simply put, an educated employee is a better employee," Nilsen told Grow Show. "They are more likely to be comfortable and confident in their own lives. The have the knowledge they need to provide sales and service."

In the current environment, with credit unions cutting expenses across the board, Nilsen said the $3.2-billion Desert Schools has made a 10% cut in its budget. But the credit union has preserved its investment in employee and member education, even though Nilsen acknowledged, "It's nebulous when you're looking for ROI."

As an example, Nilsen noted that pretest scores among DSCU employees on basic IRAs averaged 54%.

"Many employees are young and don't even have first car, so they very hesitant to talk to someone about auto financing or insurance," added Nilsen. "Commitment to financial education must start at the top, and it can't be a siloed approach. We offer an Educated Investor University for employees. DSFCU now offers nearly 100 online tutorials, with three degree tracks and six different levels."

Nilsen said the credit union is now in its second year of mandatory tutorials,

especially as it relates to retirement planning, as Desert Schools is seeking to capture retirement dollars. Staff scores have improved to 94.6%. The credit union celebrates graduations with a cap-and-gown ceremony, and more than 1,200 employees have completed more than 100,000 hours of training.

Nilsen said the credit union credits all of that education for the following growth at Desert Schools Financial Services: