Most banks and credit unions help their customers and members plan for their futures by providing lucrative products, such as low-interest loans, rewards checking and educational products to help them make smart financial choices. However, several studies have demonstrated that one type of preventative measure consumers should be taking - and aren't - is building an emergency savings fund.
Many consumers fail to put money aside for unexpected costs for a number of reasons. They may feel they lack the income or don't want to divert resources away from traditional savings. More often than not, however, some may carry the "it-won't-happen-to-me" mentality. It's important for bank and credit union members to address the benefits of emergency savings when helping customers and members choose from among different accounts. A sudden job loss, auto repair or medical bill has the potential to force consumers to drain their savings, tap into retirement funds early or turn to credit. It could also result in them losing their assets, a new study found.
The FINRA Foundation recently reported that households without any emergency savings are three times more likely to be late on a mortgage payment during periods of financial shock, and twice as likely to be involved in a foreclosure.
Educating consumers on best practices for protecting their financial futures is not only part of banks' and credit unions' fiduciary responsibilities, but also a key strategy for building relationships and trust among customers and members.