While the percentage of women attending business schools is rising, many women for whom business school is not an option have no easy access to the kind of financial education they need to manage their finances. This is both an opportunity and a responsibility for banks and other financial institutions. Better educated consumers would of course lead to a better quality portfolio for banks so this should be an obvious win win situation. Yet most banks do not offer financial education with their financial products. Is government involvement like the Consumer Financial Protection Bureau (CFPB) the answer? Recently the CFPB has asked for comments on reloadable prepaid payment cards. These cards are becoming more popular and at present, there is no required protection if these cards are lost or stolen, and the fees are not always clearly explained. Big risks here! So why do people use this financial product versus others like debit or credit cards? Does everyone have a good grasp on the differences in these financial products? My guess would be no.
Government regulators should make financial education with financial products mandatory, with bankers explaining the differences in bank products to you and when it is best to use each of them. And by the way, if you have to teach someone about the products, it insures that you understand them well yourself and that also might help avoid some of the catastrophic failures in finance we have seen recently! As a former Credit Executive of a major bank, I know many of the customer acquisition processes don't involve individual review or discussion with the customer. However, many banks have large branch systems and could accomodate more education for consumers with very little additional cost! Now that bank transactions are being done online, there is plenty of space in bank branches to create financial centers for classes and seminars on bank products for all level of customers. This would also be a great product for banks to offer their customers as a way to separate themselves from the pack. When banks say they don't make money on customers who have less than $250,000 in deposits, I say the banks are not looking at the whole picture and may be getting the wrong information! As an experienced banker, I just don't believe that banks can't make money below $250,000, particularly if you look all in with the high credit card rates etc. I suggest they look again. Maybe they need to allocate their costs differently!
Financial education combined with financial products would most certainly help women manage their finances. Other groups are filling in the void that is now left by the banks who don't offer this service. For example, "Women in the Boardroom" is offering an online discussion starting June 5, 2012 called "Financial Storytelling: How to Read Financial Statements & Understand the Numbers". Taught by Susan Hammond, this event is meant to help educate women entrepreneurs and others understand financial statements, budgeting and forecasting. Many women entrepreneurs are great at sales and marketing, but don't have the financial background to understand the numbers so necessary to run a company. But whether you have a company or not, you still need to understand how to deal with banks, and how to get the most out of your money.
Governments have a tradition of making sure people get the education they need. We have a government funded school system, and if you are a bad driver, in some states you have to go back to driving school! Today's economy requires a more sophisticated approach to money. We aren't waiting for the banks or the government to help women learn about budgeting, finance and financial statements. Check out the upcoming "Women in the Boardroom" events on womenintheboardroom.com.
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