So, what are the needs of gig economy workers? To determine that, you have to ask them.
During Callahan’s consulting and roundtable engagements, leaders often discuss how difficult it is to get members to really open up about finances, how they make a living, how they live paycheck-to-paycheck, how they save, or how they plan. But this is the first step.
This is the type of insight that will help credit unions break from the status quo. The time is ripe for exploration, for strategic thinking, and for effective tactics that financially empower people who are engaged in the gig economy.
The Gig Life: Different By Definition
There are varying stats out there about how many people are engaged in this kind of work, but it’s clearly tens of millions and growing as traditional employment with one company and full benefits for a lifetime quickly become a memory for much of the American workforce.
The Bureau of Labor says this: “There is no official definition of the gig economy — or for that matter, a gig. … A gig describes a single project or task for which a worker is hired, often through a digital marketplace, to work on demand.”
A template for this nowadays is the Uber driver — a mix of people for whom driving can be a side hustle or a full-time gig.
The playing field is changing, and so are the players. You won’t know who they are and what they need unless you ask.
I travel a lot and frequently ask Uber drivers about how they manage their lives. What I’ve learned is that they live on their phones, so any service a credit union provides better include an app. Uber offers some banking services through a third-party app, but they don’t seem robust or particularly sticky. Something easy to use, low on fees, and with a leveling feature that allows steady earners to smooth out their uneven income could be a great way to serve this group and others like them.
I’ve also learned that drivers don’t trust the company to provide the best leasing or sharing deals on cars. There’s another opportunity for credit unions. After all, people sharing vehicles aren’t taking out auto loans.
Information Is Power. Don’t Wait For Members To Ask For It.
Some participants of the gig economy make a good bit of money — IT contract work, for example — but do all members newly on 1099 income after years of W2s understand the tax ramifications?
Think about ways the credit union can provide the guidance members need to avoid the shock of that first huge tax bill. The “self-employment” tax is a wakeup call to those who find themselves paying their own Social Security match, for example, after years of that being done by an employer. Also, not all members working in the gig economy will know how much of what they do is tax deductible. They might not realize they can write off things like gas, mileage, and home office supplies, much less the home office itself, against their income. Even with the new personal deductions, these line items can further reduce taxable income significantly.
A simple handout could clearly outline examples of quarterly tax payments, possible deductions, and other tips to head off a staggering year-end liability. Information is power. That’s even more true for someone who might otherwise find themselves with a tax bill that could cause a domino effect in their personal finances.
How Will You Respond?
Strategy Lab by Callahan & Associates helps credit union leadership teams focus on issues of strategic importance, such as what’s next in the financial services space. Find out if this program is a fit for your credit union.
There When Members Need The Credit Union. And When They Don’t.
Events like an unexpected inflated tax bill can test a member’s financial, emotional, and physical resilience.
A 2016 study by the Federal Reserve revealed 46% of Americans don’t have the money to cover a $400 emergency expense. But that highlights another opportunity for credit unions to really make a difference in members’ lives.
Think about returning to that most traditional of credit union services — the small deduction from each deposit that gets routed into a savings account.
Many a boomer learned about credit unions that way when they began their work lives. The economy looked different then, but, ultimately, members’ needs aren’t so very different. They want to save for a car, a home, a child — for the future.
Credit unions will have to think strategically and creatively about how to encourage savings, but it can be as simple as providing the option to move $5 or $10 into a savings account each time a member makes a deposit into their checking account. Push today’s workers into that habit to increase the chances they’ll have a prosperous future that the credit union and its members can share in together.
This all sounds familiar, right? It’s about providing the basics of financial education through whatever channels the market demands. Credit unions already know how to do this. But the playing field is changing, and so are the players. You won’t know who they are and what they need unless you ask. That’s an opportunity you don’t want to pass up.
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