Transcription:
Penny Crosman (00:03):
Welcome to the American Banker Podcast. I'm Penny Crosman. There's been somewhat of a crisis in the lack of savings among Americans for several years, and in a November YouGov poll, about 60% of millennials and Gen Z adults said they had less than $5,000 in savings and many expressed doubt about their financial future. We are here today with Thomas Rudzewick, CEO of Maspeth Savings Bank, and we're going to pick his brain a little bit about what he's been doing at his bank and about what others in the industry could be doing as well to help solve this problem. Welcome Thomas.
Thomas Rudzewick (00:48):
Hi, Penny. Thank you very much. Appreciate you having me today.
Penny Crosman (00:52):
Sure. So tell us a little bit about your bank, just to kind of give people a picture of where you're coming from.
Thomas Rudzewick (01:00):
Sure. Well, it's a pretty old simple design and we run it pretty much the way it started back in 1947. We're a savings loan association that is located in Maspeth, Queens, New York, just a stone's throw from midtown Manhattan. We are a mutual, we were started by a group of business men that owned some of the shops here on Grand Avenue back in 1947 who decided they realized there was a need. The land around here in Maspeth was going from farmland into housing and there were tracked housing being built and there were folks that were settling in this area that needed mortgages, and the local business owners pulled together their money, went through the federal government and were issued a savings and loan association federal charter. And with that mass with Federal was born. And we've been a center of mass with Queens now for 76 years. And the way mutuality works is we really build upon our relationships in our community. We have all kinds of great events that we've continued through the decades of movie nights and concerts and free carnivals and just reaching out to the communities so that they understand that we are there for when times are good and also when times are bad.
Penny Crosman (02:23):
And you have kind of a point of view about mutual savings banks in general, right? That there should be more of them.
Thomas Rudzewick (02:29):
I'd love to see more of them. We've only had one new mutual charter in the country in the past 60 years, six, oh, that was Walden Mutual up in New Hampshire, and it was a state institution that was formed through a collaboration of farmers and agricultures that decided they wanted to start their own bank. Some of the difficulty of starting mutuals is the way you need to raise capital, and there hasn't been any other mutuals formed because it's just so difficult to be able to bring in the amount of 25 million in capital that it needs to be raised when you start a mutual, but there's signs now in DC and in some of the states that there may be some flexibility that might be coming in the future. So we're hoping that mutual mutuality makes a comeback because to me, it's the epitome of community banking.
(03:20):
It gives us the ability to have retained earnings as opposed to worry about shareholders. We're not a public bank, so we don't have any shareholders. So when we put money out and help our community, we kind of raise the whole neighborhood. And when there's issues that happen, and I'll give 9/11 as an example, even though it's over 20 years ago, it was really a focal point here at our square where we have our memorial services every single year that we help the community grieve and we help the community grow and what we're doing here at Maspeth Federal as being a partner here with our community, other community leaders has given us an opportunity to keep this neighborhood as strong as it is and we look forward to serving them for the next 75 years and beyond.
Penny Crosman (04:15):
Did you have customers and employees who were affected by 9/11?
Thomas Rudzewick (04:20):
We have an enormous amount of first responders that live here in this community, and many of our employees work locally from the neighborhoods. So yes, unfortunately we did have a tremendous amount of impact on nine 11. We're situated, our main office is situated directly adjacent to hazmat one and engine Squad 288 that lost the most amount of members on that fateful day than any other firehouse in New York City. And we grieve with them every year. We invite them to our services. We actually have a collation at the firehouse with now the children of those that had perished on 9/11, and we find it to be a good way to help the community continue to be how strong it is.
Penny Crosman (05:13):
Yeah, I know people who still remember that day and feel the impact of it even so many years later. So our topic today is really the fact that young people aren't saving enough. Is this important to you personally?
Thomas Rudzewick (05:29):
It certainly is, and I'll give you two aspects of it. I'm not a grandpa yet, but my son is married now, he's 28 years old, and most of his cousins, my nieces and nephews are of either high school or college age. And I talk to them constantly about what do you do to try to save? And of course they look at me and say, uncle Tom, why are you talking about saving money or retirement, something like that when I'm only in high school or college. I think there's a gap that's occurred in our society of teaching young people how important it is to save money. And I go back to them and I also ran a hockey program here, long Island for 10 years. I just stepped away and I always had an opportunity to be with young people at a high school level to talk to them about sports and entertainments and things that are fun, but I was always able to work in a little bit of banking in there because I think that's what really community bankers are really bred for.
(06:33):
Now, I'm second generation banker. My dad was the president of this bank for over 25 years. He's 87 years old and he still comes to work. He's our community affairs officer. We lived directly across from the main office for most of my young years, and I loved to watch him go to work. I always wanted to be a banker. And it turned out that my path gave me the opportunity to continue this legacy that we have. And I work with other family members here at the bank and also in the community that are focused on what financial literacy really means for these young people because it's so important to say that you can utilize your phone as the bank. And that connection of this new technology gives us the opportunity to manage our money and complete transactions quickly and easily. But the problem is there's no talk about how you're going to save.
(07:31):
And I find that young people today are great at going on Instagram or Facebook and all of a sudden buying something when they really didn't need it. It was more of an immediate want. And that conversation I have with my family and with some of the high schoolers that I've been around these past 10 years is just think about a little bit of not spending all your money and find a way that you can build a little friction where maybe you put some money away for a rainy day, as we used to say, or something that's there for the future, and look for some of those long-term goals.
Penny Crosman (08:08):
So they're just not aware. They're not thinking that far ahead. They feel like they don't have to worry about it. Now, what do you think makes a real impression on people in their teens and twenties and what have you been doing at your bank to try to educate people?
Thomas Rudzewick (08:31):
Well, there's another side of this story that I should have mentioned too. I went through financial stress when I was entering into college, and this is a story that I tell to young people when I'm on campuses, both high school and college level where they can understand it. When I transitioned from high school and got to college, the first thing that was approached to me on one of the career days was a banker who came up to me and said, Hey, would you like a credit card? No, I had no money. I was struggling to get back and forth to school. I commuted from Maspeth up to New Rochelle, New York, and I had no gas, I had bald tires, and I had to pay a toll. And I of course said, sure, I'd love a credit card. Without thinking about that, I put myself in a position where I built up debt and I had no way to pay for it in that freshman year.
(09:22):
At the end of freshman year, I wound up with $2,000 in debt, and it took me almost all four years of college to pay that off through part-time jobs. I'm trying to get that message out that young people should be thinking about their debt and they should be thinking about the offers that are giving to them by the financial industry and others, including retailers, that they should understand that there's a consequence to having too much debt and to really look at, to see how they should have a little bit more self-discipline and find a way that they can actually try to save money. Now, Maspeth Federal, being a mutual and being 75 years old, we used to have a lot of pass book accounts, and we still do and pass book accounts were a great way for young people to have money that they collect from any life event, from a birthday or a communion or graduation and put it into your passport account, and you'd come to the bank and you'd put the money in, and then to take the money out, you had to come back to the bank, present the book, and take it out that way.
(10:25):
Today it's so easy to scan a check and put it into your checking account and it's readily accessible in a matter of days or hours, and then all of a sudden you spend that, there's no way to think about how you're going to save it. So what we're creating is a reinvention of the past book account and call it our vault account. And part of this has technology built in where we can take a check and do a remote deposit, do a direct deposit through your paycheck or whatever way you're collecting money. But once it's in that savings account, it doesn't go into your checking. You can put a small sum into your checking and you pay your bills, but into that savings account, if you want it out, you got to come back to the branch and you got to hand them your vault card, and that's how you're going to take the money out.
(11:16):
It just makes people stop and think, and do I really need to spend that money today to buy something of a product that I probably don't even need and say, that might be my long-term saving account where I can have money in there. And at the end of the year, oh my goodness, I have a thousand dollars. I think that's who the product where community bankers need to start to think about. We've all pushed our young people into understanding that it's easy to transfer money, it's easy to spend. We need to find a way to show them. It's easy to save as well.
Penny Crosman (11:51):
You're giving me flashbacks of my childhood, I had a pass book savings account, and I would bring my book to the bank, and I believe it got stamped and I could watch the money grow. And I was very aware, very aware of how much money was in that account at any given time. And yeah, there was that break on my financial activity. I couldn't just buy whatever I wanted and do whatever I wanted. So I definitely see the value with that. And as you were talking, I was looking at the Federal Reserve Bank's numbers on household debt, and they just keep going up and up. I mean, do you worry overall about so many Americans just having so much debt, especially credit card debt, do you think that's like a house of cards that could collapse?
Thomas Rudzewick (12:42):
I find it very concerning, and I think that there has to be a change of message from the banking industry to explain to people how important it is that credit part debt can be crippling. I understand the vehicle of a credit score, and I understand how the three bureaus are showing how credit scores are important, but the message isn't getting out that you need to track that. And one of the things that we do during our financial literacy sessions on campus in all grades, but especially in high school and in college when they start to establish a credit score, is to monitor it carefully so that you understand that that buildup of debt needs to be paid off at some point. And the other feature that we have at Massed Federal is we really promote our debit card as opposed to a credit card because we try to explain to the young people that you're spending your own money, you are going to have a lot more self-control when you open up your mobile app and it sees that your checking account is a lot lower than you thought it was, and now maybe you can't go out and buy something else because your debit card is going to get capped.
(13:49):
The credit side of that has almost an unlimited amount of debt that can be accumulated, and I find that extremely troubling in this country right now.
Penny Crosman (14:01):
What would you like to see the industry, the banks and fintechs doing more of? I mean, there's obviously the financial education component, which you've been working on, and then you see apps that have sort of gamified savings. You see tools that kind of sweep excess cash or perceived excess cash from checking into savings on a monthly basis, or then there's sort of a keep the change where certain transactions are rounded off and the change is put into savings. Do you see any of those kinds of things working? Is there anything you'd like to see more of?
Thomas Rudzewick (14:42):
Yes, I do believe they work. I think they are an excellent way to start to show young people cool ways to save. As a mutual and as an older business model, it's difficult for us to sometimes think about how we're going to change the mindsets of our members to save. But I'm pleased to say that our team here at Maspeth Federal have put forward some of these great products. We use an MX money management system that attaches into our mobile app so that you can track all of your spending separate really where your money is going into your checking and your savings, and show the growth of what you're doing in that particular savings account. It, again, is going to really make the system that we've been so proud of all of our decades to become much more modern and much more tech savvy. There's a partnership that we're doing right now with a local university and one of the students we are introduced through their venture and innovation center, and this particular student attended one of our financial literacy sessions that we had on campus, and she produced a fin lit app that gamifies, just as you said, the questions and answers of what is happening inside, teaching young people the curriculum of what you would teach when you were in class, and there's a game piece there.
(16:10):
As you begin to gain correct answers, you're gaining credit to maybe the bookstore or the commissary or anywhere else on campus that you can actually spend some of those credits. That's the piece that is going to incentivize young people to participate in financial literacy and find better ways to say it.
Penny Crosman (16:32):
Makes sense. Give them a little bit incentive, make it a little bit fun. Well, those all sound like great ideas, so thank you for joining us today and to all of you, thank you for listening to the American Banker Podcast. I produced this episode with audio production by Adnan Khan. Special thanks this week to Thomas Rudzewick at Maspeth Federal Savings Bank. Rate us, review us and subscribe to our content at www.americanbanker.com/subscribe. For American Banker, I'm Penny Crosman and thanks for listening.