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Financial capability

How Big Local areas are supporting residents to develop financial skills and confidence

May 2014

Financial capability is when someone has the knowledge, skills, confidence and motivation to manage their money well. This includes understanding financial products, being able to use them and having the confidence and motivation to do so.

In this case study we look at a couple of Big Local areas where financial capability is a top priority. We also summarise the key learning points from the two areas at the end of the document.

Greatfield Big Local

Greatfield Big Local is focusing on financial capability as part of its Big Local plan to respond to residents’ needs. The Big Local partnership is determined to help residents gain access to affordable credit and is talking to Hull and East Yorkshire Credit Union (HEYCU) to support this. One of their first tasks is to work with HEYCU to establish a local presence. This means that residents will be able to open and access accounts with the credit union on the estate, without needing to travel into the city.

Putting residents at the heart of changes

The key to the approach in Greatfield is ensuring residents are at the heart of any activities. This would mean that any changes in culture around managing finances would come from within the Big Local area and would be more easily sustained. Dave Rogers, chair of Greatfield Big Local says:
“What we have tried to focus on in our Big Local plan are activities that will help people in Greatfield to help each other. We’re trying to use the money as a catalyst to achieve that, rather than just spending it on projects or buying support in.”

Hull and East Yorkshire Credit Union proposals

The credit union has been supportive and responded well to what Big Local would like to achieve in Greatfield. It has a number of proposals to help improve financial capability in the short and long term:

  • Finance buddying – recruiting, training and supporting a network of community volunteers who can help other members of the community learn how to manage their money better.
  • Establishing a volunteer-run community presence (a HEYCU local office).
  • Setting up and administering school savings clubs at three local primary schools.
  • Providing resources to promote the services of the credit union in the Greatfield area.

The hope for this work is that:

  • Residents will have an improved knowledge and understanding of credit union services and more people will use these services.
  • Young people will understand and appreciate the benefits of a savings culture which will support the prevention of future financial exclusion issues.
  • Local groups, clubs, societies and organisations will benefit from a simple facility to deposit and take care of their funds, with the money used in support of the local economy.

Long term goals

Becoming financially sustainable

The long term aspiration is that Greatfield will become a more financially sustainable community. In the future, Greatfield Big Local will offer flexible advice through working with UnLtd as part of its Big Local plan. This advice will help people overcome some of the hurdles to starting their own social enterprises and provide new opportunities to get into employment. The group also hopes to create more apprenticeships and training schemes for young people. 

Relieving debt issues

Another important part of achieving a financially sustainable community is to help relieve people of difficult cycles of debt repayments. These are partly caused by the high interest rates charged by payday loan companies and doorstep lenders. If residents can instead access services from a credit union or community development finance institution (CDFI), they will spend less money on servicing debts and have more money to spend locally. This will in turn support the local economy and help money to circulate better locally. This is sometimes known as sticky money. You can read a case study about is here.

Supporting a culture of saving

Credit unions and CDFIs are keen to promote the habit of saving. Residents who borrow from the credit union are required to start saving as part of their repayment of the loan, helping them to create a more stable financial future. Eventually, residents will be able to use savings for purchases, rather than need to use loans. 

New opportunities

Volunteering opportunities to develop skills and help other residents

Credit unions also offer volunteering opportunities for people who might want to work with them. This helps residents develop their skills, while also enabling them to actively help fellow residents and local schoolchildren to improve their skills and confidence around money.


Whitley Big Local

Whitley is tackling financial capability issues in a similar way to Greatfield. We spoke to Mo McSevney who is a member of the Big Local partnership in Whitley, to hear about her role in developing a relationship with the credit union.

Creating the right environment to improve financial capability

Becoming a financial capability volunteer 

Mo’s interest in credit unions comes from a strong family history, going back as far as 1940 when her grandfather opened the first credit union in Glasgow. Mo is keen that credit unions continue to promote saving as the central part of their ethos, while they adapt to meet the current needs of residents. She feels that credit unions need to use all opportunities available to encourage a culture of saving and responsible financial behaviour, even if they are often responding to the immediate demand for affordable loans.

Importance of volunteer support

In order to improve financial capability, people need the chance to voice their concerns and discuss their personal circumstances openly. This is why volunteers who can help provide support have such an important role. As Beth Rowland from Berkshire Credit Union told us:
“You need trust to say things that are sometimes difficult to say. People won’t mind talking to Mo, whereas they won’t know me.” 

In Whitley, while parts of the area are in financial difficulty, the areas surrounding it tend to be very affluent. Mo feels it’s important that people can talk about managing their money to somebody they can relate to. She says:
“There is a drastic lack of financial education or knowledge for most people in Whitley. People around here get embarrassed that they don’t know, so we need a trusted face they can build a relationship with.”

Making the credit union more accessible to residents 

Mo says:
“It has to be about building trust, with simple, accessible messaging that relates to where people are in their lives. Often the problems associated with low levels of financial capability are because people don’t know what questions to ask in the first place.” 

Mo feels that for the credit union to become a normal functioning part of residents’ approach to their finances, volunteers must be visible, accessible and speak to residents in their own language. She says:
“We need to make it part of normal life, so if people feel they need a fridge they will go to the credit union to sort it out.”


Berkshire Credit Union 

Berkshire Credit Union offers a number of services that it hopes residents in Whitley will be able to take advantage of. It is planning to open a small volunteer office in the community centre in Whitley to improve access for people. This will provide a space where people can access the credit union and support their three main objectives. The credit union’s objectives are to help residents: 

  • manage money
  • save for emergencies
  • borrow responsibly.

Working with young people 

Berkshire Credit Union has started a savings club scheme in local primary schools called Small Change accounts. In this, the best savers are rewarded on the basis of how regularly they save and not how much they save. Encouraging an ethos of saving early on through direct experience of managing money will help children develop these skills for the future.

Product-based savings

By changing the culture of borrowing, Mo hopes that the causes of being in debt can be tackled at the root to reduce reliance on loans. One of the ways of borrowing Mo is keen to promote in Whitley is product-based savings where residents can make purchases of white goods or other household items through Berkshire Credit Union. The credit union offers much more affordable borrowing rates than companies which offer pay weekly schemes on products. 

Collective shower purchasing

One product Whitley Big Local have looked into is ’shower-loans’ for people who live on the estate, so that residents can choose to get shower facilities installed when the council refurbishes bathrooms. The scheme would involve a collective purchase agreement, with the council working with the credit union. Residents then enter a savings club with the credit union to pay for the shower over a number of weeks, with some flexibility from the credit union about the length of time over which the loan is paid off. 

Many credit unions offer a ‘white goods’ scheme through the Co-operative, which offers energy-efficient products at a fair price, which can be financed through a credit union loan. Niamh Goggin from Small Change has recently written about a similar purchasing scheme. Read here for more information about how you might take advantage of this. 


Conclusion

Big Local areas can strengthen financial capability in a number of ways and we hope this case study has provided some inspiration. 

To get started on strengthening financial capability in your Big Local area, keep these key learning points in mind: 

  • Talk and consult with residents in your Big Local area to understand more about their financial capability needs.
  • Develop a relationship with your local credit union or community development finance institution to see how you can work together to respond to these needs. Create some ideas and develop plans you can put into action in your Big Local area.
  • Explore whether there are any specific opportunities such as product-based savings and collective purchasing of which you could take advantage.
  • Link up with local advice services run by organisations such as the Citizens Advice Bureau or debt advice services such as Step Change to find out what services they already provide and how you could work together.
  • Find residents who are interested in becoming financial capability volunteers to help increase people’s awareness of what support is available. Volunteers will develop skills and the wider community will benefit.
  • Make sure residents have the opportunity to talk to someone they trust about financial issues.
  • Ensure that the language is clear, simple and accessible so that residents can understand how developing financial capability will benefit them personally.
  • Try to create some momentum around financial capability – having a local presence and working with young people will help you achieve this.

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