Youth education

It's not child's play.

Beyond the feel-good images of happy mascots and children watching their pennies grow are compelling business reasons for credit unions to increase membership among children, teens, and young adults.

"Kids are in their brand-development stage right now. If we wait until they're in their borrowing stage, it will be too late because they'll already have a relationship with someone else," says LeAnn Achtenberg, chair of the National Youth Involvement Board (NYIB) and director of marketing and business development for Electrus Federal Credit Union, Brooklyn Center, Minn. "We all know how hard it is to make someone switch. It's a constant problem all financial institutions face."

The lack of young adult members (ages 18 to 25) will cost credit unions an estimated average of $14 million in lost loans during the next 10 years, according to "Attracting and Retaining Young Adult Members," a report from the Filene Research Institute, Madison, Wis. In 2002 (most current data available), only 26% of 18- to 24-year-olds in the U.S. were members of credit unions vs. 36% of the general population.

While credit unions typically have viewed young adults as a credit risk, that viewpoint is shifting. Today's young people will determine the future strength of credit unions.

Mark Meyer, the Filene Institute's director of innovation, offers this advice to credit unions: "Look at all the life stages that occur between the ages of 17 and 29, and structure your products and services, or business model, around the needs occurring in those life stages."

Between ages 17 and 21, young people graduate from high school, go to college, take out college loans, start new jobs, and move to new residences. Many apply for their first vehicle loan and credit card. Meyer believes credit unions have overlooked the importance of this stage of members' lives.

"Credit unions have missed the mark," says Meyer. "Most don't even start a marketing plan until young people are 30 because then they are profitable. Well, they've already gone through some huge life stages.

"Credit unions haven't put youth into marketing plans or strategic plans," he continues. "Many believe piggy banks and naming a few different types of accounts are serving youth."

CU youth initiatives

Despite compelling business reasons for marketing to youth and young adults, only 40% of credit unions make an effort to attract members younger than age 25, notes Philip Heckman, the Credit Union National Association's (CUNA) director of youth programs. Only one of eight actively targets people aged 18 to 25, according to CUNA research.

Credit unions with youth education and marketing programs devote an average of only $4,000 a year to youth initiatives, while credit unions with more than $100 million in assets average $10,500 a year.

"Developing young people into full and active members makes a great deal of sense from the standpoint of preparing them to be fully self-sufficient, responsible adults," says Heckman. "Recognize that they need financial services even in their youth, starting with savings accounts and going into management/transaction accounts and into credit.

"It makes sense to offer them full and active membership as they grow," he continues. "It makes competitive sense because when they turn 18, everyone will want them. Banks and credit card companies will be chasing them, and it will be very expensive to compete. But you can get kids involved and make them full credit union members while they're still very young, while few people are chasing them. It's much less expensive to develop them in that way."

As head of CUNA's youth programs, including Googolplex, the online periodical for credit union members in elementary through high school, Heckman stresses the importance of having youth initiatives that are more than just fun. "Young people don't simply need to be occupied and entertained. They have an actual need for financial services."

He says children go through four phases of financial education starting as young as preschool age: how to spend money, how to save money, how to manage money, and how to borrow money. Credit unions' youth education initiatives should address each of these stages.

CUs doing it right

Credit unions have embraced innovative approaches to reach young members. State Employees Credit Union Senior Vice President Leigh Brady oversees a three-part youth initiative targeted to different age groups.

The Raleigh, N.C., credit union's Fat Cat program for members from birth to age 12 boasts an impressive 74,990 members to date. It's part of a comprehensive approach, explains Brady. "We go in early and get them on the right path. We become their primary financial provider early on and educate them to look at all options."

State Employees purchased licensing for the Fat Cat program (owned by Credit Union Central of Canada) through the North Carolina Credit Union League and has used the product since November 2000. Components include a share account with $5 opening deposit, a gift bag, and a membership card that can be converted to an automated teller machine card. Fat Cat members receive a dedicated newsletter, Fat Cat Paw Prints, containing articles and games that teach elementary school-age children basic financial matters. Members also can visit an interactive Web site at cufatcats.org.

State Employees serves 1.1 million members through 170 branches in North Carolina. Seventeen Fat Cat mascots serve these branches, making appearances at community events, school functions, and as part of school outreach efforts. Brady says the credit union has approximately 10 different financial education presentations it makes available to schools. Subjects range from wants vs. needs, economics, and the differences between credit unions and banks.

Staff buy-in has made the program successful, says Brady. In the past, she says, the credit union offered "standard youth services." With Fat Cat, however, "it's just plain fun. At the same time, it's providing something the kids really need: a good financial education."

When Fat Cat members turn 13, they're automatically enrolled in the credit unions "Zard" program for 13- to 19-year-olds. Their accounts automatically become "Z-Share Accounts" and they have access to a full range of services, including checking accounts, loans, share certificates, and money market accounts.

They also receive a quarterly newsletter called Money Matterz that provides a more sophisticated level of financial information and education to correspond with their growing financial independence. Money Matterz covers practical information such as how to write a check, use debit and credit cards, and save for college. Zard members have access to www.teenzard.org for additional financial tips and activities.

When Zard members turn 19, they transition to the credit union's "Off to College/Off to Work" program. These members receive a planner book as an incentive when opening a new checking account and receive the Grassroots member newsletter.

Brady advises credit unions to start with the youngest group and automatically transition them into the next program as they get older. "Don't leave it up to them to move to the next group," says Brady. "It's important to maintain the relationship. Once you get it, don't lose it."

Community outreach

At Community Financial Members Credit Union in Plymouth, Mich., three community education partnership coordinators work closely with area schools. Coordinator Natalie McLaughlin says education initiatives are an important part of the credit union's mission. "Our education programs are designed to reach the community, and our student credit unions are one piece of that."

During the 2003-04 school year, Community Financial Members ran 17 in-school credit union branches: 10 in elementary schools, two in middle schools, and five in high schools. They served 1,610 student members who brought in $68,000 in savings account deposits during the school year. The overall asset size for these student branches is $303,944.

"This program ties in directly with Michigan's benchmarks and standards," explains McLaughlin. The credit union meets school curriculum requirements for providing career training. The 869 students who worked for the in-school credit unions had to fill out job applications, interview for jobs, receive job training, and work in positions of responsibility during the school year.

"Student credit unions are a piece of an education initiative that includes classroom presentations, scholarships [this year the credit union gave 10 $1,000 scholarships], and seminars," says McLaughlin. "It has to be a complete package. Otherwise it doesn't have the benefit for the students."

Credit union staff spend one-on-one time with students, teaching them how a credit union operates. McLaughlin says it's extremely rewarding to realize the impact the program has had on students. Two former students came back to the credit union for summer jobs.

"Last year," says McLaughlin, "a student worked with us at one of the high schools ... and she has decided to pursue [a career in] accounting after her experience at the student credit union." Before that, McLaughlin explained, "she hadn't even considered anything like that."

McLaughlin says community exposure is probably the most immediate benefit the credit union enjoys from its youth initiatives. "The other benefits are more nebulous and harder to measure in terms of people choosing a credit union later in life and sticking with a financial institution when they go off to college, because of the Internet capabilities now."

Reaching young adults

Bryan Sims finds it amusing when credit unions target youth marketing programs to members aged 13 to 21. "If you're marketing to 13- to 21-year-olds, the 13-year-old is in middle school and the 21-year-old is in a bar."

Sims, the 21-year-old founder of brass|CU, a money magazine for young adult credit union members and the founder of brass|MEDIA Inc., Corvallis, Ore., says, "The first and most important thing for credit unions to do before deciding 'We're going to target youth' is to define what youth is."

Sims suggests breaking youth markets into ages 13 to 17 and 17 to 25 segments. "When teenagers turn 18, they become classified as adults," he explains. "When they become classified as adults, they get put into a whole new marketing segment and credit unions forget about them. They don't start getting marketed to until they're 24 or 25, maybe even a little bit older.

"Problem is," he continues, "between those two points is when they're getting their first credit card, auto loan, student loan-all the things that will keep them at the financial institution for the rest of their lives.

"Make sure you capture them in that transition from 17 to 18, when they're graduating from high school, getting their first job, moving out of the house, going to college, and doing those kinds of things," Sims adds. "The second they hit 18, they're on every kind of mailing list, from credit cards, to tobacco companies, to the Army Reserve."

It's not that young adults aren't interested in money. On the contrary, says Sims. A 2003 Gallup survey showed 51% of 18- to 29-year-olds thought they'd have a million dollars in assets sometime in their life. "The generation is very much in tune with money. It's just a matter of speaking our language."

Speaking the financial language to youth-from childhood on-is essential for credit union survival. And the traditional emphasis on waiting until people are "profitable" is the hard, expensive way to build membership and market share, CUNA's Heckman maintains. Easier and less expensive is having a program for introducing children to a progressive series of services that they're educated to use responsibly and "raising them to profitability."

Sound off about your credit union's youth education programs at CREDITUNIONmagazine.com

RESOURCES

* brass|MEDIA Inc., Corvallis, Ore.: brassmedia.com.

* CUNA: cuna.org/initiatives/youth/ index.html.

* Filene Research Institute, Madison, Wis.: 608-231-8550 or filene.org.

* National Youth Involvement Board: nyib.org

Copyright Credit Union National Association, Inc. Aug 2004
Provided by ProQuest Information and Learning Company. All rights Reserved