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Help Members Conquer Their Financial Fears

Inertia keeps many people from moving their money to more affordable providers.

April 28, 2014
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“Psychologists who study the impact of wealth and inequality on human behavior have found that money can powerfully influence our thoughts and actions in ways that we’re often not aware of, no matter our economic circumstances,” notes an interesting Huffington Post article, “How Money Changes the Way We Think and Behave.” 

We know money is a necessity and proper management of it is important. The article indicates, however, that money is not necessarily an indicator of success.

“We tend to seek money and power in our pursuit of success… But it may be getting in the way of the things that really matter.”

Further, income levels and happiness levels are not related. “After a certain level of income that can take care of basic needs and relieve strain,”—reportedly, incomes between $50,000 to $75,000—“wealth makes hardly any difference to overall well-being.”

This article suggests the various psychological influences money and wealth have on our attitudes and behaviors from the perspective of the affluent as well as those less advantaged.

Research findings this week, too, reveal other beliefs, viewpoints, and psychological motivations that exist as we determine whether to save or spend, as well as other demographic factors that come into play as we make financial decisions.

Do you know what beliefs your members hold and what motivates them?

‘All I ask is the chance to prove that money can’t make me happy.’—Spike Milligan, writer, comedian

“Some financial behaviors differ by gender while others do not,” says an Urban Institute report. Here, survey results show that overall, “women are less financially knowledgeable than men, controlling for such demographic and economic characteristics as employment, income, and educational attainment.”

Further, money behaviors among women are different from those of men. “Women are less willing… to take financial risks and have more credit cards than men, though women are equally likely to pay their credit cards in full every month.”

Even more behavioral differences with money are evident when comparing married and unmarried people by gender. Interestingly, “Women… report slightly higher economic satisfaction than men—overall and by marital status.”

Single moms are identified as a “vulnerable group,” and one that is “worthy of attention” as they face “multiple financial challenges.”

Most Americans Don’t Trust the Stock Market,” reports CBS News. A Bankrate.com survey shows 73% shy away from investing in spite of very low interest rates in safer investments like bonds.

“Trepidation around investing in stocks appears to persist across all age groups and income levels,” and the “overly conservative investment stance” will add to problems that many Americans face with regard to retirement planning.

Indeed, “Retirement Remains Americans’ Top Financial Worry,” says Gallup, which reports that 59% of Americans worry about having insufficient money for retirement, surpassing eight other financial matters.

Other financial worries, according to Gallup, include the inability to pay unexpected medical costs (53%), inability to maintain standard of living (48%), and shortage of funds to pay off debt (40%).

“Retirement may be a time that many working adults look forward to, but it is paradoxically a source of stress in the here and now.”

How does fear inhibit wise financial decision making? And how can you help members conquer their fears with good financial opportunities?

‘Money does not make you happy but it quiets the nerves.’—Sean O’Casey, Irish dramatist

Money set aside may help to calm anxieties, but saving isn’t always easy. One credit union, however, has found a way to help members to save with an interesting incentive.

Lottery-Like Prizes Spur Saving,” says a Boston College blog post. Communicating Arts Credit Union in Detroit offers members an entry to a drawing for cash prizes for every $25 deposited in savings.

“Doorways to Dreams,” which helps operate the credit union’s program, notes “This isn’t about whether we think lotteries are good or bad but [about] the behavioral response.”

The savings program “is better than buying lottery tickets,” one member observes. “The chance of winning something is a lot better and you don’t ever lose” the money saved.

Another entity that helps low- to moderate-income savers is SaveUSA, “a voluntary program launched in 2011, which “encourages low- and moderate-income individuals to set aside money from their tax refund for savings,” according to mdrc.org

Financial institutions in these cities have designated special savings accounts for those who set aside between $200 and $1,000 per year. Money can be withdrawn, but those who maintain their pledged amount received a 50% match.

The program is designed “to help them develop a habit of saving” through its incentives and disincentives.

Although the second year of the program resulted in drop in SaveUSA pledge rates, it did “lead to increases in account holders reporting pro-savings attitudes,” which could lead to stronger financial security.

Finally, a look at consumer attitudes toward financial institutions in general reveals that even though consumers may be unhappy with their institution, they are unlikely to make a switch, according to MarketWatch.

“Consumers tired of rising checking account fees regularly threaten to switch [providers], but that talk is cheap, experts have found.”

Complaints are more likely these days as 66% of Americans remain unhappy with big banks after the financial crisis and 26% feel guilt when banking with a big bank. Further, 72% say they would think about switching banks should there be an increase in checking fees.

So why do consumers remain loyal?

“Banks are sticky,” experts say. “A lot of our financial lives are tied up in these accounts… It’s often too much trouble to move all of their direct debits.”

What incentive can you provide to help consumers decide to make the switch to your credit union, given that many are already unhappy with their bank?

As research findings reveal this week, our thoughts about money will dictate our behaviors, sometimes as a result of fear, worry, apathy, inconvenience, and existing habits.

Some of these thoughts may be detrimental to not only fiscal health, but happiness overall.

How can you help consumers think good thoughts?

LORA BRAY is a research librarian at CUNA.

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