Supporting credit union members in their financial wellbeing

• Context:
• The study:
• Key findings:
• Points to consider:

Context:

The level of financial capability among adults is key to their financial wellbeing. A simple definition of financial capability is the ability of individuals to manage their money effectively. It involves having the knowledge, motivation, confidence and skills to spend and save responsibly, and to be able to cope with life events and income shocks. Low levels of financial capability are problematic because they tend to be linked with higher levels of financial vulnerability. Half of all UK adults are considered financially vulnerable, with 21% of the population ‘rarely or never’ saving, and almost half (47%) not feeling confident about managing their money. This lack of confidence can be detrimental to overall wellbeing, leading to lack of sleep, poor concentration and having to work longer hours to make ends meet. Offering financial education is an important way to provide the knowledge and skills people need to manage their money well.

The study:

This 2020 working paper has been produced by researchers at Coventry University in collaboration with Liverpool John Moores University, and published by the Centre for Community Finance Europe, who are based in Ireland. The paper examines the role of credit unions in improving the financial capability of their members, through the provision of financial education, as well as resources for credit unions to support the process.

The findings come from research conducted by Coventry University that tested the effectiveness of practical education materials that had been designed to enhance consumer financial resilience. This summary from a later report includes recommendations for credit unions based on the initial research, as well as details of a free MoneySkills app that offers guidance for money management and also includes a budgeting tool

Key findings:

• Offering financial education to members helps build the knowledge and skills that are needed to manage their money well.
• Credit unions should continue to educate members about money management, including budgeting, setting financial goals, and the promotion of thrift and financial resilience through saving.
• The role of credit unions in the community is vital, with credit unions needing to use their community role to support financial wellbeing, by working in partnership with other stakeholders such as the local council and community-based voluntary organisations.
• Credit unions should consider offering one-to-one meetings or small group financial education workshops for current and prospective members depending on their resources. As well as providing education, it also provides a safe space to discuss and ‘break taboos’ about money.
• In cases where members feel not in control of their money or face escalating debt, individual face-to-face support or signposting to free, independent debt advice is needed.
• Supporting members to make changes to their financial habits can improve their ability to manage their spending, help them save, and improve their financial wellbeing.
• Teaching members how to budget enables them to understand how much they spend and where savings are possible. Members should also be supported to set clear financial goals that are tailored to their own situation. Emphasising the need to build up a small savings reserve is also crucial.
• Credit unions should see their members’ life events as opportunities to intervene. These life events include leaving school, moving to a new house, starting a family or preparing to retire.
• Different formats of financial education materials are needed to suit the differing needs of credit union members, and when financial tools are offered they must be straightforward and easy to integrate into regular money management routines. Digital and non-digital formats are needed to fit easily into members’ everyday lives.
• The MoneySkills app discussed in this paper provides content on budgeting and saving through the use of video clips, online magazines and an interactive budgeting tool.
• Credit unions can use this app as a source of simple financial education on budgeting, setting financial goals and saving to share with their members.
• Credit union members can use the app as an interactive tool to manage their finances.
• The MoneySkills app is freely available on both iOS and Android devices through online app stores. The paper also includes guidance for credit unions in how to promote the app to their members.

Points to consider:

Generalisability/ transferability :

This report is of significant interest to policymakers, stakeholders and other parties interested in delivering financial education, and particularly to credit unions and their members.

Relevance:

These findings are relevant to credit unions and their members throughout the United Kingdom and Ireland.