When you receive a paycheck, what are your next steps? Do you have set amounts that you allocate to certain bank accounts? Do you specify how much you’ll be allowed to spend across a set of expense categories? Maybe you even have analysis programs that help you track your recent financial activity and their relation to your goals? Since you’re reading a financial inclusion blog, I’m guessing you fit into one if not all three of these money management groupings. But of course this isn’t the case for everyone.

For many, receiving a paycheck isn’t followed by examining a financial analysis program’s dashboard, making adjustments to a financial plan for moving forward, and carefully dispensing funds. It’s followed by the elation that comes from knowing that you’ll be able to pay your rent this month. By the relief that you’ll be able to pay back the family and friends who lent you money. Maybe even by a slightly frivolous purchase to help wash away the sting of financial stress. Money management in one of its many forms likely comes, but it’s often that it comes much after the paycheck. And it’s reasonable to assume that this separation gets in the way of more holistic money management.

With the help of a $350,000 grant from the Center for Financial Services Innovation (CFSI), the Neighborhood Trust Financial Partners will soon launch PayGoal, an employee payment program that’s coupled with an array of financial services. The program provides on-site, individual financial counseling to companies’ employees, facilitates their participation in formal financial services, offers them financial capability tools, and assists in their establishing financial plans and goals – all while integrating the companies’ payment system. Workers will predetermine how much of their wages will be allocated across spending and savings buckets, and instead of a traditional paystub, employees receive their pay with a report on their financial progress over the pay period (money saved, debt reduced, financial milestones reached, etc.) as well as educational messaging, such as the difference between gross and net pay.

PayGoal is one of eight organizations who received support from CFSI’s Financial Capability Innovation Fund II. In addition to monetary assistance, CFSI’s support to these organizations includes strategic advice and guidance, technical assistance, and peer-learning opportunities. PayGoal is operating as part of the Neighborhood Trust’s Employer Solution venture.

Image credit: The Examiner

Have you read?

A Holistic Approach to Money Management

Bill Pay as an On-Ramp to Financial Inclusion

Payroll Loans: The “Coffee Date” of Financial Services

According to the Financial Trust Index, a quarterly survey of public opinion, only 21 percent of Americans trust the financial system and only 23 percent trust large national banks.

On the other hand, nearly 63 percent, according to the same survey, trust credit unions. Hmm…impressive.

What’s more, in a survey rating the reputation of 34 different industries, credit unions had the most positive rankings, higher than all other segments of the financial system and also higher than non-financial industries including retail stores, schools, technology and communications companies, automobile companies, health care companies and the federal government. That’s right — numero uno.

And as a sample of one, I can also vouch for my own loyalty to the credit union that has served my family well for many years.

Why do the credit unions get so much love?

I am sure that the answers are complex and historic, and that they go well beyond my limited knowledge of the credit union movement in the United States. Maybe it’s because credit unions are local and small, and maybe because they did not participate in the kinds of transactions that got mortgage brokers and big banks in trouble, precipitating the global financial crisis. One could unpack any number of factors.

Ultimately, however, I am becoming convinced that client ownership is at the root of it all. It seems that credit unions actually do put the client first, unlike many banks, which only say they do. And I attribute that to the fact that for credit unions clients are not just clients, they are owners. If clients are annoyed by something a credit union does, like charging high penalty fees for small missteps, managers will hear about it not only from the (often lowly) customer service department, but at the governance level. When customers are also seen as owners, responsibility to customers is intrinsically aligned with responsibility to shareholders, while in corporate banks it is possible for customer interests and shareholder interests to diverge or conflict, giving bank managers divided loyalties. This difference can hardly escape showing up in the culture and decision making of the institutions.

Maybe that’s why the thing I remember most from my last bank  is that it allowed overdrafts on my debit card without my agreement then socked me with enormous overdraft charges (grrrr…), while the most recent news from my credit union is that it reimburses me for fees I pay when using non-credit union ATMs (wow, how nice).

I have long been wary of credit unions because of the susceptibility governance problems that has plagued them over the decades in credit unions around the world. I have also been frustrated with credit unions because their structure makes it hard to attract investment for growth.

But the success of credit unions in building an excellent reputation has me wondering whether more client voices in the boardrooms of financial service providers might be a powerful way to ensure that the institutions actually practice pro-client behavior.

Image Credit: gobankingrates.com

Have you read?

An Excellent Resource on Regulating Client Protection: IFMR Trust’s Blog Series

Let’s Actually Talk about Money Management

Money Management: What’s a Bank Account For?