WILLIAMSBURG, Va.–The federal regulatory agencies need to join with non-profit groups, schools, financial institutions and the military to improve personal finance knowledge of service members and their families to prevent them from being financially exploited, NCUA Chairman J. Mark McWatters said during remarks here.
Speaking to the Defense Credit Union Council’s Annual Conference, McWatters said, “Service members and their families face unique financial challenges, whether serving on active duty, returning to civilian life, or living as a veteran. A strong foundation of personal finance knowledge, knowing how to save and create a budget, and understanding the value and importance of money, is essential in today’s rapidly evolving financial marketplace. Not only does it affect an individual’s financial well-being, it also has implications for the economic well-being of the nation and, in the case of service members, our military’s readiness.”
NCUA noted in a statement that research by members of the Financial Literacy and Education Commission has documented the benefits of financial literacy and personal financial education. Yet, only 17 states require high school students to take a personal finance course before graduation.
Lack of Basic Understanding
The result, McWatters told DCUC, is that too many of the young men and women entering the military lack a basic understanding of financial concepts or don’t know how to apply them to real-world financial situations.
“The financial decisions these young soldiers, airmen, sailors and marines make today will affect them for the rest of their lives,” McWatters said. “It is important that they start off on the right path. Military credit unions play an essential role in educating these young service members and I encourage you to continue to do so.”
Small-Dollar Loans
During his remarks, McWatters also touched on what he said is the need for all credit unions to continuously innovate their systems, technology and thinking to keep pace with changing consumer behavior and financial needs. Specifically, he noted that there continues to be strong and consistent demand for short-term, small-dollar loans and that credit unions can be a viable alternative for people of modest means, including members of the military, in need of these types of financial products.
“It’s important that credit unions consider the future possibilities from this type of engagement,” McWatters said. “It may begin with a small dollar loan. But, if you combine that loan with financial education and other services, you have the building blocks of a financial relationship that benefits both the borrower and the credit union in the long-term. These products could be a first step in bringing the millions of unbanked and underbanked into the not-for-profit, cooperative credit system.