April is in full swing, which means National Financial Literacy Month is here once again. For the past 18 years, this month has been an invitation for banks and credit unions to do their part in educating Americans, young and old, about personal finance.
But data shows that the financial literacy rate in American adults has decreased from 42% to 34% from 2009 to 2018. The average number of financial questions Americans could answer correctly dropped 14% from 2009 to 2021.
What does this mean for your bank or credit union? Why should you invest time and money in building your customers’ financial literacy? Because educating them improves your profit potential and improves customer loyalty. Let’s explore why.
Financial Literacy Is Good for Business
Customers with higher financial literacy make better money decisions over customers with lower financial literacy. A 2021 national study found that 53% of highly financially literate respondents spent less than their income, 65% had set aside an emergency fund, and 70% opened a retirement account, while less than half of those with poor financial literacy engaged in similar actions.
Additionally, credit unions that offered financial education had a credit card delinquency ratio of 1.05%, a full 40 basis points below those who didn’t. Customers who understand how to manage their personal finances are more reliable and less likely to get overwhelmed with debt and fall into delinquency or bankruptcy.
Educating people on financial topics means they’re a lower financial risk to your bank or credit union. Your customers are more likely to keep more money in the bank, use more savings and investment products, and offer a higher return on investment to your institution when they’re financially literate.
Customers Want to Be Financially Literate
Over 60% of U.S. consumers put financial education as the most important supplementary graduation requirement. Plus, more than 50% would teach their younger selves basic money management, the value of saving money, and how to set and work toward financial goals.
While you can’t help your customers go back in time, it’s never too late to reach out and help your customers learn about managing their personal finances.
In fact, 60% of US banking customers want their banks to provide personalized financial advice. One study found that banks that sent customers advice on how to avoid fees were able to increase satisfaction scores by 166 points and trust scores by 172 points on a 1,000-point scale.
You can nurture strong relationships with your customers by providing the information and resources they need to improve their financial literacy. This helps your customers feel more satisfied with your services and want continue to do business your bank or credit union.
Ready to Start Educating Your Customers?
Nearly 30% of Americans are uncomfortable asking questions about finances or financial products. That’s why it’s important to make the first step when opening dialogue with your customers and members.
Using a regular email newsletter lets you tailor relevant financial topics to your audience and guide them to the answers they need to better manage their finances. Engaging your customers helps your bank or credit union increase profit potential, lower risk, and improve customer satisfaction.
Both during National Financial Literacy Month and throughout the year, consistent communication is important to see the benefits financial literacy brings.