I was surprised when I read an article recently that said the average American has more credit card debt than retirement savings. I guess at some level I understood people needed to reduce their debt and do a better job of preparing for retirement, but I never realized that the debt had exceeded the average Americans long-term savings.
As a credit union we believe it is our responsibility to improve the financial lives of our members, and that a great first step to do this is through educating our members about how to better manage their finances. As the recent overhauls to mortgage lending revealed many adults are confused by the products and basic financial information available to them.
I’m encouraged by examples of organizations dedicated to helping educate members about how to understand and better manage their finances. Greenpath Debt Solutions, located in Farmington Hills, is an example of a local company that specializes in helping people become more financially literate. Our credit union has partnered with Greenpath to provide free financial seminars to our members. Our members who attend the seminars have expressed to us that they walk away feeling more confident that they can take control of their finances and understand the steps they need to take to improve their overall financial status.
Financial institutions can help consumers on their path to improved financial literacy by clearly communicating financial information to their customers. In December, JP Morgan Chase announced an overhaul of their account disclosure forms to make it easier for their customers to understand terms and conditions of their checking accounts. This is a simple solution, but a great step that can help make it easier for consumers to understand and better manage their personal finances. I’m hopeful other banks and credit unions will follow this example to simplify customer communications.
A focus on financial literacy by customers and financial institutions is the right first step to reverse the balance in favor of retirement savings and away from credit card debt.