Why credit unions must boost their investment in financial education

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Money is the biggest source of stress for many Americans. And yet, a recent study found that most incoming college students struggle with basic financial literacy.

I often saw these financial education shortfalls in the young troops I counseled during my military career. Many of them had never made a budget, and almost none understood the importance of saving early in life. The reality is that we’re often underpreparing our young people when it comes to handling basic money functions; and credit unions have a unique role to play in helping to educate our communities’ students.

S. Jamie Gayton is EVP of member operations at PenFed
S. Jamie Gayton is EVP of member operations at PenFed

The cornerstone for financial well-being is financial education.Financial knowledge, habits, values and confidence all contribute to a successful financial life. By high school graduation, every student should have a solid grasp on these concepts. The lure of consumption starts young; marketers target children with bright, colorful television commercials at an early age and teenagers are bombarded with social media ads for products. If we teach students to understand the basics of financial decision-making and reinforce the impacts of their choices on their future well-being, we will arm them to make more-informed choices when they become adults — increasing their confidence and reducing their stress.

I have seen first-hand how successful financial literacy programs can be. PenFed Credit Union has a large presence in Puerto Rico, serving nearly 200,000 members there today. When the island was hit hard by Hurricane Maria in 2017, we decided we wanted to do more than just participate in short-term recovery efforts. We determined that one of the best ways to show our long-term commitment to the island was to invest in the future of the next generation. We teamed up with a leading education company, EverFi, to launch a financial education program for high school students, called “Tu Dinero, Tu Sueño” (“Your Money, Your Dreams”). After receiving this financial education during the 2018-2019 school year, students increased their scores on basic financial skills assessment tests by an average of 93%.

This school year, we are expanding the program to support 20 public and private schools in Puerto Rico, covering topics like budgeting, insurance, credit cards, student loans, mortgages, taxes, stocks, savings, retirement and the importance of maintaining good credit scores. PenFed is also expanding its partnership with EverFi by making online financial literacy courses available via PenFed.org.

Credit unions have both the opportunity and responsibility to invest in their communities’ financial well-being. One of the best ways to do this is to work with schools or after-school programs to offer a financial education technology platform. Every student should graduate high school understanding how to set up a budget; the difference between needs and wants (opportunity costs); how to build credit and manage a credit card; basic investment knowledge; how to buy insurance; the importance of compounding returns and saving early for retirement; and how to determine the difference between good and bad debt.

All schools require students to take math, history, English and science, but we have yet to make personal finance a required subject in most high schools. We expect young adults to learn these skills on their own, or through their parents’ examples. Unfortunately, many actually learn the hard way—through trial and error and costly mistakes. Learning financial literacy skills can transform communities by developing confident and knowledgeable future leaders who can act decisively to achieve their collective financial goals.

One of the biggest appeals of a credit union – besides better interest rates and lower fees for financial services – is that your money stays in the community. It helps a family buy their first house; it helps send a student to college; and it helps a new business to open. It can also help members and future members learn to make informed financial decisions.

This kind of investment does more than revitalize a community; it also energizes an organization. Companies often assess themselves by the level of employee engagement. At PenFed, we have found that investment in our military core and our Puerto Rican communities have led to greater retention, satisfaction and engagement. Our teammates love supporting our communities through outreach and volunteerism.

We cannot make decisions for people or promise success, but we can help educate them so they have the skills, understanding, and opportunity to make informed decisions about their financial well-being.

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Financial literacy Financial wellness PenFed Puerto Rico