As Prepared for Delivery on November 6, 2019
Thank you, George, for that kind introduction. It is a pleasure to be with you today and to take part in this vital discussion on improving the level of savings in America.
Enhancing the financial well-being of all Americans is an important subject to me. Not, just from a policy perspective — it is important to me on a personal level as well. While serving as a commercial banker earlier in my career, I saw first-hand the excitement of a family who improved their financial well-being through a combination of financial education and safe and affordable financial services. This allowed them to increase their savings and eventually purchase their first home.
I saw in that family’s eyes the sense of freedom and empowerment that comes from being able to control their own financial future. I carry that memory with me, as the Chairman of the National Credit Union Administration. I always remember that one of my paramount responsibilities is to create an environment where more Americans can control their financial futures and enjoy the enormous opportunities this great nation provides.
Data released by the Federal Reserve as part of its Report on the Economic Well-Being of U.S. Households in 2018 (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) shows that many adults are not prepared to deal with unplanned expenses or brief financial disruptions. A car repair or broken appliance would be unaffordable for nearly 4 in 10 adults, the survey found. These individuals would need to borrow from friends or family, pay for the expense with a credit card, or take other measures. Still, 12 percent of respondents said they would be unable to pay for an expense, like these, by any means.
Despite the positive trends in the financial well-being of Americans since the end of the Great Recession, financial challenges remain, especially for those from underserved, underbanked, and unbanked communities.
Our economy and financial system are becoming increasingly complex, making the need for a solid foundation of personal finance knowledge more essential than ever before. However, only 17 states require high school students to take a personal finance course before graduation.
This is troubling because the teenage years are often when young people are starting to engage with the financial services sector for the first time. The financial decisions these young people make will affect them for the rest of their lives. It is important that they begin on the right path.
Likewise, surveys of Americans show that most do not have a basic understanding of financial concepts or know how to apply them to real-life financial situations.
If we are to improve the financial well-being of all Americans, then more people need access to financial education resources and tools, we must encourage the creation of products and services that make savings easier, and we need to bring more Americans into the financial mainstream.
Financial Education Is Part of the Credit Union Mission
The promotion of thrift is inscribed in the Federal Credit Union Act and it is a core value of federally insured credit unions. Credit unions were founded more than a century ago to meet the needs of communities ignored by traditional financial providers, and to improve the lives of their members.
Helping members make smarter financial decisions through personal finance education is part of the credit union mission of people helping people. According to our data, more than 50 percent of all federally insured credit unions offer financial education services. The institutions that offer these education services have more than 104 million members, meaning that nearly 90 percent of all credit union members today have access to some form of personal finance education through their credit union.
I’m especially proud of the 365 credit unions that have in-school branches at elementary, middle, and high schools across the country. Research by the Financial Literacy and Education Commission and others shows that providing financial education at an early age plays a critical role in shaping financial practices later in life. These in-school branches give students the opportunity to learn about savings and financial concepts, and to interact with the financial system in a safe environment, helping them to form healthy, long-term financial habits.
Innovation Holds the Key to Addressing the Savings Crisis
We must also increase the availability of safe and affordable financial services and products that make it easier for more Americans to save. Automatic savings programs are an effective way of making saving for a rainy day or the future, easy and effortless. If financial institutions have these types of services, I encourage their customers or members to take advantage of them. They really do work and are an important tool for saving and creating financial security.
But we should not rest there. Consumer behavior and technology are evolving so it’s essential the financial services and products that help Americans save and improve their financial security keep pace. This means reforming our regulatory structure to meet the challenges of a twenty-first-century financial landscape and the needs of twenty-first-century consumers. At the NCUA, we are modernizing our rules and regulations to create an environment that encourages growth and innovation within the credit union system so it can continue to meet the needs of its members well into the future.
It also means developing new ways of doing things and utilizing emerging technology. Embracing the opportunities financial technology provides is necessary if we are to resolve the savings crisis.
I recognize the rise of fintechs may seem daunting and disorienting to many of us. And yes, we must address the potential cybersecurity risks and regulatory issues associated with them.
But, the technology could be an effective way of addressing the lack of access to safe and affordable financial services and creating new products and services that can help Americans save and improve their financial well-being. If the promise of fintech could be married with the insights gained from research in behavioral economics, we may be able to develop financial products and services that can make saving just as simple and effortless as ordering a coffee on your smartphone.
Financial Inclusion Is the Civil Rights Issue of Our Era
Finally, we must expand access to affordable financial services. For far too long, too many Americans have been overlooked or locked out of the traditional financial system. We also know that the lack of access to affordable banking and lending services holds working families back from climbing the financial ladder. We need to remove the obstacles these Americans face.
I consider financial inclusion to be the civil rights issue of our time. Whether it’s the challenges faced by African-American, Latino or Native American working families; the access challenges that military veterans or disabled Americans experience; or the lack of access to capital that’s putting enormous stress on communities in rural America, we need to do a better job of making more safe and affordable financial services and products available to these communities.
This will require us to utilize technology, form new public-private partnerships, and support community-based depository institutions, like credit unions and community banks, which are often the only federal insured, financial service providers in many of our underserved communities. But, we must do more, as we can no longer afford to have so many of our citizens outside of the financial mainstream.
We must also provide more opportunity those who have minor, non-violent criminal records. It’s estimated that 70 million — roughly one in three people — in the U.S. have a criminal record. A great many of these Americans face barriers to hiring that leave them unemployed or underemployed, and without the financial means to improve their well-being.
The NCUA Board has taken a critical first step in bringing those Americans out of the shadows with our Second Chance Initiative. This proposal would provide expanded employment opportunities in the credit union industry for people convicted of minor crimes and offenses.
Where appropriate, I encourage the financial services industry and others to consider similar proposals. We should not be afraid to give people a second chance if they have made a good faith effort to rehabilitate themselves and have paid their debt to society.
Addressing the lack of savings in America is an enormous task and one that will take the combined efforts of policymakers on the federal, state and local levels, as well as non-profits, financial institutions, parents, educators, community organizations, and leaders of industry. We all must work together because all of us have a stake in the outcome. We all benefit when more of our citizens can control their financial futures, and enjoy the limitless opportunities this nation provides.
I know we are up to the challenge. Credit unions began when ordinary people came together to find ways to expand access to credit and improve the financial lives of their neighbors and communities. I see similarities between the founders of the credit union movement, and all of you gathered here today. I see the same dedication and determination to tackle the savings crisis and to improve the lives of all Americans.