It's Not Just About Financial Literacy-It's Also About Financial Well-Being

A growing consensus is emerging that the ultimate measure of success for financial literacy efforts is improving an individual's financial well-being.

So, what is financial well-being? From a consumer perspective, financial well-being has four characteristics:

  • Control over day-to-day, month-to-month finances,
  • Capacity to absorb a financial shock,
  • On track to meet financial goals, and
  • Financial freedom to make choices to enjoy life.

Although financial literacy is important, it is only one of three components that contribute to a person's overall financial well-being. The other components include access to affordable financial services and financial capability, or the attitudes, skills and the self-confidence to make smart money management decisions that best fit a person's life circumstances.

Credit unions continue to excel at creating the building blocks for the members' financial well-being. They not only provide financial education and access to affordable financial services and products, but they also work to improve their members' overall financial capabilities by providing a combination of the right financial products and the right guidance at certain life stages. For example, when a couple is ready to finance their first home, credit unions often provide affordable mortgage loan options along with first-time homebuyer counseling.

Next month is Financial Literacy Month, and it is a perfect platform for credit unions to continue to educate and empower their members on how to lead stable and healthy financial lives. Not only will this engagement help your members make better-informed financial decisions, but also it strengthens your credit union's relationship with your members, and ultimately contributes to your credit union's bottom-line because an informed member is able to fully utilize the array of products and services your credit union offers.

Starting on the Path to Financial Well-being

Financial literacy workshops, online financial education tools and one-on-one financial coaching are some of the ways that credit unions start their members off on the path to financial well-being.

It is also important to offer financial education at an early age. Positive financial habits developed in children and young people can strongly affect their adult financial well-being. Credit unions help children and youth on the path to financial well-being through initiatives such as youth savings accounts, in-school credit union branches and financial reality fairs.

NCUA supports these efforts. Our consumer website MyCreditUnion.gov and our financial literacy site Pocket Cents, provide consumers with timely and practical financial tips, interactive learning tools and financial calculators. Content on these sites is organized to provide information and resources to consumers at various life stages and as they prepare for various life events. For example, your members can find helpful information on such topics as how to start saving, pay off debt, read a credit card statement and understand what is contained in financial disclosures and loan applications. We encourage you to link and refer your members to these online resources.

NCUA's educational content is also available in a variety of formats, including web articles, brochures, videos, interactive applications and on social media. NCUA additionally provides a calendar of annual financial literacy events, topics and opportunities that credit unions can promote and participate in throughout the year.

Helping to Increase Access to Affordable Financial Services

Access to affordable and responsible financial services helps consumers build financial security and improve their long-term financial prospects. Unfortunately, low-income, underserved and unbanked consumers are especially vulnerable to exclusion from basic and traditional financial services, including access to affordable credit.

Credit unions in many ways are uniquely positioned to help these populations. At the end of 2015, 2,297 credit unions had an NCUA low-income designation, and these institutions are often the only federally insured depository institutions serving low-income and economically distressed communities. To support these communities, low-income credit unions offer services such as credit-builder loans, incentivized savings products and financial counseling.

To support credit unions' financial inclusion efforts, NCUA and the U.S. Department of the Treasury recently signed an agreement that will streamline the application process for low-income designated credit unions to become certified as Community Development Financial Institutions. Credit unions that obtain a CDFI certification have access to grants and other financial resources that allow them to develop unique products and services to meet the needs of low-income members.

For more information, visit http://go.usa.gov/cf7VW.

Working Together

Given their mission, credit unions are uniquely positioned to help members improve their financial well-being. NCUA supports and encourages credit unions to use Financial Literacy Month and other opportunities throughout the year to help improve their members' overall financial well-being.

To learn more, visit MyCreditUnion.gov.