There is no way you could have avoided it. Virtually every facet of life has been affected by COVID-19, including the financial health of millions of American individuals and families.
All the little things that made credit union members’ daily lives routine – daily chores or commitments, dropping the kids off for school, daily or weekly work meetings, negotiating when to leave work to pick the kids up – have been put on the side of the road in order to keep families and those around them safe.
COVID-19 has put millions of average Americans’ financial health at moderate to severe risk. With restaurant, retail, and many other “non-essential” businesses closed or temporarily shut down, U.S. unemployment claims reached 36.5 million since mid-March.
Because of this shutdown, America is taking a crash course in saving the money they still have. And Americans apparently have a lot of room for improvement when it comes to financial health. According to Yahoo Finance, prior to COVID-19 a full 69 percent of Americans had put away less than $1,000 in savings. In the midst of this pandemic, however, the U.S. net savings rate in 2020 is the highest since World War II, according to Peterson Institute for International Economics. Personal savings rates have skyrocketed from 8.2 percent in February to 13.1 percent by March 20, according to Statista.
The question is how many Americans can save in a healthy manner, and whether they will do the small things that enable them to negotiate their way out of the dark financial tunnel COVID-19 has created. Not only that, but how many will continue that discipline once the pandemic has passed and find their way to better financial health?
As part of our year-long program exploring the 5 Pillars of Financial Health, we’ll be talking about the ways your credit union members can help themselves and their families save money during the pandemic. For many members, evaluating one’s financial health is not a fun process. But when it comes to finding the path to financial wellness during and after this COVID-19 crisis, there is no larger priority, both for them and their families. Where to begin? Well, it starts with some simple (if painful!) math.
Here are three key steps to take towards financial health:
- Evaluate Member’s Savings For Their Financial Health
It’s easy to let your anxieties get the best of members when delving into the potential unpleasantness of one’s financial health. Acknowledging the inefficiencies and coming to grips with a lack of discipline in spending habits is a tough pill to swallow. So where are they with their “emergency fund” or savings account? How long can their existing savings last them?
To evaluate financial health, take a look at their weekly expenses, write them down or type them into a spreadsheet, and add them up. Just make sure your members are being honest with themselves and include all expenses! Now, cross-reference their total expenses with the amount of money they have saved, as well as any forthcoming income they will be receiving. How long will their savings last? Whether they can afford a week, a month, or two months, it’s still a knowledgeable place to start to gauge the relative financial health of the member.
- For Better Financial Health, Members Need To Cut Frivolous Expenses
The next step to assessing financial health is coming to grips with the areas of spending members need to immediately cut or cancel. Which of those expenses they wrote down or placed in the spreadsheet can they get rid of right now? Do they really need cable TV? Can they separate it from their internet? Does their Netflix have that big a hold on them? Books are back in a big way, FYI. That $6 morning coffee every morning on their way to work? You know, they sell $20 coffee machines at Target. Do they have that adventurous habit of going out to restaurants more than they should? #CookingIsCool and so is financial health!
- Negotiate Essential Bills For Better Financial Health
Credit union members also pay for some expensive essentials that contribute to the status of their financial health. How about having them call up and negotiate with their cell phone and insurance providers, or begin shopping around for other options? Millions of Americans are in the same boat financially and car insurers are already cutting premiums because there aren’t as many drivers on the road. Have members call them up, tell them they might not be commuting or driving as often, and ask for a less expensive premium. Now they need to apply that line of thinking to all insurance policies. Members never know how much money they’ll save if they don’t ask! Even small budget cuts can make a big difference when it comes to financial health.
Credit card debt is center stage in America in the 21st century, even without the effects of COVID-19. Most major credit card companies are working with customers to avoid late fees, employ skip-payment options, or implement lower interest rates. Once again, members won’t affect any change in their potential financial health until they call their credit card companies and ASK!
Now, make sure members include those changes in that new budget timeframe and see how it changes their financial health. Establishing a savings budget is a central theme for many during the COVID-19 crisis. Depending on their field of employment, some members may be in for a longer or shorter unemployment period than others. Members or communities might need a bridge to tide them over until their next source of income arrives. Regardless of the situation, short-term, small-dollar lending is a necessary facet of any healthy, service-based, community-centric credit union. During the COVID-19 pandemic, please join QCash Financial in helping members better their financial health. QCash Financial has created a small-dollar lending movement through our Financial Relief Program to provide the access to affordable credit millions of individuals and families need in these extraordinary times. Contact us today for more information.