They don’t borrow much, if at all. They don’t make regular deposits. Most are unemployed. They don’t have credit histories. Almost all of them still live with their parents.
Not exactly your target market, right? Wrong.
Just because young consumers aren’t profitable today doesn’t mean they won’t be tomorrow. Credit unions—and their competitors—who have foresight are throwing parties and handing out prizes just to get young consumers in the door.
Young members today represent your credit union tomorrow. Eventually they’ll borrow money for college, cars, and houses. They’ll get jobs and need checking accounts, savings accounts, and individual retirement accounts.
In other words, they grow up.
Along the way, they’ll develop credit histories based on their financial behaviors. They’ll buy insurance, make investments, and meet with financial planners to figure out how to reach their goals.
They can’t do all of that—or any of that—alone. They’ll need a financial institution every step of the way.
That’s part of what motivates credit unions to invest in youth today, even though they don’t currently generate much, if any, revenue. Building relationships with youths now is easier than waiting until they’ve establish financial relationships with competitors. And it all starts with education.
“The sooner you connect with them, the sooner they know what a credit union is, and the sooner you can get them involved,” says Lynn Wright, marketing director at $825 million asset SAFE Federal Credit Union in Sumter, S.C. “This also means it’s more likely they’ll make your credit union their primary financial institution. It will become a lifelong financial partnership.”
Banks aren’t waiting around, cautions Leigh Brady, senior vice president of education services at $25 billion asset State Employees’ Credit Union (SECU) in Raleigh, N.C. Brady points out that large banks often partner with colleges and universities to operate student account cards—stored-value cards that college students swipe at the cafeteria or the student union to pay for meals or books from prefunded accounts.
The cards feature bank logos and the campus might also include bank signage, giving these banks a significant presence in students’ lives. This makes it nearly impossible to compete, says Brady.
“We’re not going to buy the relationship [through a contractual agreement with colleges and universities],” Brady says. “If we don’t reach them before that, however, it’s difficult to reach them afterward.”
Those early adult years are crucial, too. Peak borrowing begins at about age 25 and continues until 44, according to CUNA’s National Member Survey. So the earlier credit unions can enroll members, the more of that early borrowing they can capture.
SECU relies on research that shows young adults stay with their first financial institutions for seven to 10 years. If those years span at least part of the decade after high school graduation, SECU could provide former youth members with all kinds of lending products: car loans, school loans, and even mortgages.
“We’re not just here to give out loans,” Wright says. “We’re here to educate our members and help them save time and money.”
Brady agrees. “We bring a lot more value to the relationship than a bank would,” she says. “That’s why it’s important for us to get in early.”
Next up: Check back to see how SECU segments its youth membership.