Following Chase’s Snafu, Banks & Credit Unions Can Do Financial Education Right
Financial Institutions Can Help Consumers Boost their Financial Savvy
Sarah. Cooke, Wednesday, May 22
So, I sat down with the brainy lady behind The Brainy Business, Melina Palmer, to talk about how financial institutions can help consumers boost their financial savvy. Fortuitously, but unfortunately for them, Chase made a financial education faux pas on Twitter April 29, which sped around social media like – well, like only missteps can. Most seemed to find it condescending, while others supported Chase’s point of personal responsibility. The problem was that not everyone who’s funds are running low at the end of the week is irresponsible.
Snark in marketing can backfire, as Melina pointed out the week before when we spoke. In addition to that big no-no from part 1 of this series, Effective Financial Education Starts with Getting Inside Consumers’ Minds, she also offers a lot of helpful hints for your marketing and financial education messaging in part 2, below. Read an abridged version of our conversation below or check out the full video here!
Sarah: So, how can credit unions and banks work with their members or customers to steer them toward a more consistent and better financial budget?
Melina: The best way to be steering members or customers toward a specific task is to have a lot of messaging around that item. You need to know what's a priority and have it frequently in your messaging.
The subconscious brain can and typically does process about 11 million bits of information per second. That's a lot. We're constantly churning through information. The flip of that is that our conscious brain can only do about 40 bits. It doesn't click in the way we think it does, so you just need to keep top of mind.
There's a whole space within behavioral economics called choice architecture. And so, it's helping people to make the best choice for them and to see the options in the right way. The way you frame a choice has a huge influence on the choices that people make.
And, so if you can expect where they're going to make errors, you can then put in a nudge to help them make a better choice. The most obvious example is when you are driving the car; if you didn't put on your seatbelt, it dings. You hear a noise that helps you to realize that, ‘Oh, I forgot.’ The car manufacturers had to anticipate and expect to the error that most people want to be safe and be buckled in the car.
Ser Tech’s Flitter Credit Network can help put your members in the habit of checking their credit scores. Learn more here!
Sarah: That's an excellent example with the seat belt. That's something everybody can relate to. What about people who tend to be overly optimistic about their financial futures?
Melina: This is called optimism bias. Studies have shown, if you ask somebody how well the they think the prospects are for themselves or their own families, they'll say they're very high. If you ask those same people, what they think the prospects are for their city or country, in general, they'll say I don't think they're going to do very well.
There's a really good way to balance the optimism bias, which is looking at using optimism bias to set your big goals and your dreams. I have an entire episode about this on my podcast, but you need that motivating dream. And when you set the day-to-day tasks, the smaller things that you're needing to do, and look for ways to balance your optimism bias.
I know I'm a huge victim of, ‘I just have to get through these 10 things today,’ and then I do two of them and I feel really bad. But if I had only said I was going to do one thing, and then I did two, I would feel really great, right? So instead you want to look at the way to balance and have the tasks be very minute and set the goals very low, so that you can be constantly meeting goals. Then you get this snowball of willpower that comes from that.
Sarah: A lot of consumers have issues with impulse buying. How do you break the bad ones and help people create new ones?
Melina: The funny thing about habits is the way we think about habits is wrong and where we look to change them. We're looking at the wrong part of the cycle of the habit. Our brains are driven by rewards – they want dopamine, they want oxytocin, they want whatever these treats are for them all the time. So, they have triggers for the things that will give them the boost they're seeking. Often our brains don't really care whether you get the boost from chocolate or caffeine or buying something, it just wants the joy of the release of that chemical in the brain.
What we need to be looking at is the trigger. It can be something as simple as when you're driving down the streets, you take the same route to work every day. You drive right by a Starbucks, and then your brain goes, ‘Oh, I know there are treats there.’ Then you feel this craving, and you can't you can't turn it off, but if you don't drive by the Starbucks, you might not have the trigger at all.
Sarah: Speaking of habits, how often do people check their credit scores? And how often should they be checking their credit scores? How can community financial institutions work to make this a habit for consumers? It's good not only for your credit, but it's also good to deflect fraud and other nasty situations. So how can we make that a habit?
Melina: Credit scores are a funny little animal. It's one of those things that we know we should do, but you kind of get that ostrich effect. What if it's bad? If I don't know, it can't hurt me, which is silly. But we do that for self -preservation.
The standard rule is, you should be checking your credit score once you year, and then some give the recommendation of three times a year. I did some research on this, and I found 54% of Americans say they never check their credit scores. So that's bad.
But scaring people with a statistic like that doesn’t work; it normalizes not checking credit scores, so they feel ok. The way that you would want to help make it into a habit would be setting up some sort of nudge for people. So, you could have something as simple as you know, it's credit report, checking season, and maybe three times a year
You don't even have to give them any sort of an incentive to check, but just the reminder of, you know, its Financial Literacy Month! Everyone should check their credit scores now.
And, actually, rhyming is really helpful. Our brains think things that rhyme are more credit, they have more credibility to them, which is silly but true. You can remember it easier, like an apple a day keeps the doctor away.