Perspectives On the Financial Lives and Savings of Foster Youths Participating in an Asset-Building Program

Background: Each year over 29,000 young people exit foster care without achieving a permanent outcome, “aging out” to face elevated risks of homelessness, incarceration, unemployment, and homelessness (DHHS, 2011; Courtney and Heuring, 2005). Prior research has examined foster youth experiences with employment and postsecondary education (Hook & Courtney, 2011); however, relatively little is known about the financial lives of these young people. This study sought to illuminate how foster youths negotiate their often complicated financial landscapes and accumulate assets that could facilitate successful transitions to adulthood.

Methods: Research participants included young people participating in an asset building program, Opportunity Passport^TM, directed at current and former foster youths. Researchers conducted semi-structured interviews with 38 participants and 8 staff members in four sites in three states. Sites were selected to capture ethnic diversity and urban and rural contexts. Each participant’s one-on-one interview took place in person and lasted from 45 to 110 minutes. Interview questions addressed program components, personal financial activity, and efforts to build savings. Interviews were recorded, transcribed, and analyzed using NVivo qualitative analysis software. Three researchers drew on prior research to develop concepts and themes that were elaborated in an iterative process involving coding interviews, revising categories, and recoding.

Results: Youths employ a wide variety of financial services, both traditional and nontraditional. They often expressed distrust of traditional banking services, drawing from experiences with high fees or penalties levied on their accounts. Most youths do not have steady and reliable sources of income, and consequently struggle to engage in regular saving activity. They employ a broad set of strategies for making ends meet, often relying on friends or kin for support, sharing expenses, and foregoing impulsive purchases. Aspects of the Opportunity Passport^TMprogram enhance saving behavior, according to some participants, including barriers to easy withdrawal of savings, cash incentives for participation, the cash match provided to purchase assets, and financial literacy training. Single mothers have a heightened sense of the importance of saving, but less means to do so. Participants reported high levels of debt, and expressed considerable anxiety taking on additional debt. Several participants credited the savings achieved through the program for allowing them to continue in post-secondary education programs and achieve residential stability.

Implications: The study illuminates the financial lives of foster youths and highlights the need for policy makers and practitioners to be mindful of building financial literacy knowledge and skills, as well as assets in this population. Currently, most states cap the amount of savings that young people may accumulate while in foster care, a policy that likely inhibits saving behavior. Without the social and financial support of a stable family, these young people often experience a difficult transition into adulthood and financial independence. The Opportunity Passport^TM  program has identified some of the challenges to building savings among these young people, as well as the possibilities for enhancing success. Additional research is needed to expand our understanding of foster youths’ financial lives, as well as how programs may help build assets and financial literacy.