#2 of 5: Financial Education for Young Adults: A Community Imperative?
Brandon Michaels, CEO, Mazuma Credit Union
Financial education allows a credit union to benefit its community by leveraging its financial in-house expertise.
This is the second in a series of five articles concerning the unique role credit unions can play in leading the financial services industry through a strategy that embraces Corporate Social Responsibility (CSR).
The first installment of this series demonstrated that in the increasingly competitive financial services marketplace, credit unions have an advantage by enjoying higher levels of customer/member loyalty driven, in part, by a proactive CSR platform. Credit unions can, therefore, serve as a model for how a financial institution can drive growth through community connections based on CSR.
This second installment in the series looks at the advantages of and various approaches to using in-kind, or non-cash, contributions to CSR efforts. This approach leverages in-house assets—either products or employee expertise—and results in high returns on investment to both the community and the company.
IN-KIND CONTRIBUTIONS TO THE COMMUNITY
The Expansion of Corporate In-Kind Contributions
Non-cash or in-kind contributions are the largest segment of corporate philanthropy. Direct corporate philanthropy generally falls into three categories:
• Direct Cash: From the corporate treasury.
• Foundation Cash: Grants from the corporate foundation.
• Non-Cash: Product donations, employee services, and other
A recent survey of Fortune 500 companies by the Committee Encouraging Corporate Philanthropy1 found that, despite the recession, 59 percent of companies increased their philanthropy between 2007 and 2012. It also found that the amount of in kind contributions has grown sharply. As a percentage of total corporate giving, non-cash contributions grew in aggregate from 57 percent in 2007 to 69 percent in 2012. Giving USA, which measures all forms of philanthropy, reported a similar trend in corporate giving.
In-kind contributions can take many forms, including contributions of a company’s manufactured product; contributions of excess on-hand supplies including furniture, office supplies, vehicles or land; loaned equipment or facilities; support services, like phone or copier use; loaned employees who work at a nonprofit; and having employees provide free services to or educate members of the community.
The Value of Non-Cash Contributions
Forward-thinking companies understand that CSR and community investment efforts are not only about “doing good.” Rather, in today’s marketplace, well-organized, well executed CSR activities are critical factors in driving business improvement, customer loyalty and employee retention.
With declining revenues, companies tightened cash budgets and began exploring new ways to invest in communities strategically with non-cash resources such as medicine, merchandise, or professional volunteer services. Non-cash giving accounted for more than 95% of the total aggregate giving increase from 2007 to 2012, as companies provided robust product and pro bono commitments to community partners.
The measure of successful community-focused CSR is, therefore, both the number of individuals who are helped and also the more bottom-line focused measures of creating new markets, engaging employees, and building the brand’s reputation.
Business leaders should use every tool in their CSR portfolio to help create economic value that can also help address relevant societal issues.
Rather than relying primarily on cash contributions to worthy organizations, a company can achieve a high return on its philanthropic investment to both the community and the company by leveraging its own products and employee expertise.
The more companies leverage their on-hand resources to deliver social value to their communities, the more engaged their employees become and the better the company performs in the marketplace. The result is companies achieving progress on societal challenges while driving business performance.
A well-developed corporate program becomes a valuable corporate asset, amplifying its overall business model. Investing in the local community with in-kind resources creates a cycle that will create positive business, social, and economic impact providing a vivid illustration of “the credit union way”—people helping people.
LEVERAGE YOUR EXPERTISE
On-hand resources, whether tangible products or employee skill and knowledge, make for optimal in-kind contributions. They provide the greatest benefit to the community, as well as emphasizing the company’s brand and product, service or expertise.
Using employee expertise provides nonprofits or individuals in the community with expertise to which they do not have access, while increasing employee skills and understanding of the community.
A few notable examples:
Campbell’s Soup: Formed a partnership with the American Heart Association to address consumer concerns over diet and heart health and built a long-term program to address childhood obesity and hunger in local communities.
Vodafone: Provided free phones when it saw an opportunity to bring mobile-banking services to rural Africa.
Home Depot: Builds homes for veterans using supplies from its stores and skilled employees to do the construction.
Pharmaceutical Companies: Provide medicine donations to individuals without access to health care.
LensCrafters: The “Give the Gift of Sight” 3 program sends company employees and doctors on optical missions to rural America and overseas.
Lawyers, Accountants, Doctors: Traditionally provide pro bono services to the community in their respective areas of professional expertise.
CREDIT SCORE EDUCATION: AN EXAMPLE OF USING CREDIT UNION EXPERTISE
The optimal in-kind contribution for a credit union is to use the knowledge and experience of its employees to teach members of the community valuable lessons in financial literacy.
This aligns the CSR effort with the business goal of providing affordable financial solutions, by providing financial education and advice to the public. This builds the credit union’s brand, creates good will in the community, and increases the number of financially literate potential customers who are more likely to make use of a credit union’s services.
The community benefits when young adults learn about common financial concepts such as credit ratings and how to improve their credit ratings. Understanding what factors affect credit ratings and the areas credit ratings affect their lives is valuable knowledge.
To share expertise in financial matters, credit union team members can present economic education lessons through classes, workshops, contests, and events.
The Benefits of Sharing Knowledge on Credit Scores
A higher credit score means a consumer is more likely to get credit, insurance, or a service—and pay less for it. Understanding how credit scores function benefits the individual, the community, and the credit union. This is especially true for young adults after becoming financially independent.
1. Uses of Credit Scores
Most young adults have a vague understanding that lenders use a “credit score” to determine whether and under what terms they can receive credit cards, loans, and mortgages.
Many, however, do not comprehend that credit scores affect other facets of their life. For instance, auto and home insurance companies use credit scores to decide whether to issue a policy. Phone companies may use them to decide whether to provide a service and on what terms. Even more surprising to some is that credit history reports can be used in employment decisions.
2. Understanding How A Score Is Determined
Many young adults possess only an ambiguous understanding of what factors affect a credit score. Some factors are obvious, such as paying bills on time, filing for bankruptcy, and the amount of debt compared to credit limits.
Other factors are not so apparent, such as insufficient credit history, leading to remarks such as “I can’t get a loan because I have no credit history and cannot get a credit history until I get a loan.” The optimal number of credit accounts can also be confusing—too few or too many can both have a negative effects.
Other unknown factors are the effects of recent applications for new credit or “inquiries” on a credit report.
3. How to Improve A Credit Score
Once they understand the importance of a credit score, most young adults will genuinely want to take steps to improve it. This is not an abstract theory, but instead a set of concrete action steps.
It is intuitively obvious that paying down debt improves a credit score. But young adults will want targets for credit utilization, whether to prioritize paying off installment or revolving debt, and advice on the benefits of not allowing credit accounts to go unused. In other words, a little activity is better than no activity. Options on how to remove credit card debt are also useful.
The Benefits to Credit Unions
Using a credit union’s inherent in-house expertise to educate on financial matters such as credit scores creates an auto-catalytic reaction. Educating the public creates people better able to make informed decisions and thus more likely to become credit union customers. It also provides good will in the community, improves the brand image, and engages employees whose own skills and knowledge of the community will grow as a result.
The financial services marketplace remains challenging. Credit unions, however, have a unique opportunity to deliver value to consumers that elevates the credit union brand through integrating CSR into business strategy.
Brandon Michaels leads the awesome group of Mazumans at $490 million Mazuma Credit Union in Kansas City. He took the reins at the ripe-old age of 31 and looks forward to changing the credit union industry. Prior to serving as the President & CEO, he served as the Chief Financial Officer for two years.
Brandon moved to Kansas City from the Bay Area, California, where he was the Vice President-Finance/CFO at San Francisco Fire Credit Union. He is also a third generation credit union CEO. While Brandon grew up in the credit union movement, he worked three years for the Federal Deposit Insurance Corporation as a Bank Examiner before making his formal entrance into the industry…an industry he thought as a child, ‘you couldn’t pay me enough to work in this place!’
Brandon was recently recognized by the Credit Union Times as a Trailblazer 40-Below, a recognition awarded to credit union executives who are working at warp-speed to better the future of the credit union industry. Brandon is also a private pilot, an awesome dad to Charlotte & Kason, and a loving husband to his beautiful wife Kathi.