JULIE CONNELLY
Savings shrinking

Even in a constantly changing economy, one thing remains constant among consumers: debt. The trend has not gone unnoticed in the financial services industry. Local banks and financial institutions have joined forces with national lenders and the Federal Trade Commission to introduce financial literacy courses aimed at educating consumers on managing their money.

Financial literacy seminars and lectures have become an increasingly important focus for local banks and organizations, performing a public service while, at the same time, creating a larger potential pool of financially savvy and creditworthy customers.

“I think we are seeing a trend in people saving less,” said Julie Connelly, vice president and director of community relations at Citizens Bank of Massachusetts. “Americans are saving a negative 1.3 percent – the lowest since the Depression. We wanted to educate consumers on how to shop smart, including how to manage their money, and we’ve partnered with other organizations to talk about credit card debt.”

Last year, Citizens announced an initiative along with the United Way, the Organization of New Equality, Jane Doe, Consumer Credit Counseling and other local and national organizations to promote financial literacy targeted at a wide range of audiences.

“We’ve partnered with these different community groups to do seminars and lectures at schools and community centers,” said Connelly. “Making staff available to help people on a large basis or a one-on-one basis is a good idea because banks can be intimidating. It helps if you have someone to show customers how to use the ATM, open a checking account or keep track of their money.”

Educational programs including homebuying seminars and community lectures on banking have increased as local banks become more involved in national education campaigns.

“There are literally hundreds of banks in the state that are working with various educational programs,” according to Joe Bartolotta, spokesman for Eastern Bank, located in Lynn. “[The state treasurer’s] Saving Makes Sense program, the MBA [Massachusetts Bankers Association] foreclosure prevention initiative and the [city of Boston’s] Don’t Borrow Trouble Campaign are all public awareness campaigns. We also work with community organizations that work with teens … that is the best way to reach younger people and provide them with basic life skills like managing a checking and savings account.”

Despite the economic downturn and rising unemployment, consumers are still buying and spending by relying on credit and, according to a recent study by college lender Nellie Mae, college students are among the biggest credit spenders.

The Federal Trade Commission teamed up with Boston University, Northeastern University, Suffolk University, University of Massachusetts at Boston and Nellie Mae to launch Project Credit Smarts 2002, which focuses on educating Boston-area students about credit card use, including its dangers and pitfalls.

Credit Smarts is a crash course for freshmen and other students aimed at introducing students to all aspects of credit cards, including resisting the temptation of mail and Internet offers of free gifts, bonus airline miles and low introductory rates offered by credit card promoters.

“When school reopens, it is a season where credit card companies set up tables to use aggressive marketing to lure students into signing up for a credit card,” said Barbara Anthony, the FTC’s Northeast regional director. “The [schools’] administration understands the problem that students face so we thought consumer education for students would be important.”

“It is amazing what a 19-year-old will do for a T-shirt,” said Allen Ward, assistant dean of students at Boston University. “We are trying to strike a balance with aggressive marketing by taking steps to limit exposure students have. This is not to say we are against credit cards. If used appropriately, they can be a benefit.”

‘Good Investment’

According to the recent Nellie Mae study, the percentage of students with high-level credit card balances – from $3,000 to $7,000 – has increased by 61 percent since 2000, and graduating students typically have over $20,000 in combined education loans and credit card debt.

Since the campaign’s launch in Boston in September, local schools have distributed thousands of pieces of educational material in bookstores throughout their campuses and are now beginning to plan presentations and seminars with the FTC on financial literacy, which will be tailored to the size, specific needs and schedules of the schools.

“No one benefits when students can’t make payments and ultimately ruin their credit,” said Anthony. “The industry itself feels education would be beneficial to anyone.”

Credit Smarts is not just for students. In the same Nellie Mae survey, the agency said in the wake of recent business scandals and the plunging stock market, all consumers need to exercise control over their finances.

“No matter what the economic situation is, there is always a need to reach out to people and make sure that they have appropriate access to information to make the right choices,” said Bartolotta.

As the financial services industry becomes more complex, educating clients on the products and programs available is advantageous not only to the consumer, but to the banks as well.

“Ultimately, it is easier when the consumer knows about the products – not necessarily understand the products, but know they exist,” said Bartolotta. “All banks need to be involved because it is a good investment of our time … and in our best interest to work with educated consumers. The more these consumers know about the industry and the programs, the easier it is to work with them.”