Economic Well-Being of Youth Aging out of Foster Care: Impacts of Financial Capability Services

PURPOSE: Youth aging out of foster care are among the most vulnerable youth in U.S. society. There is overwhelming evidence that they struggle on practically every measure of healthy transition to adulthood. Among a host of challenges these youth report significant financial strain. While there are many avenues to address the financial circumstances of foster youth this study focuses on the concept of financial capability, an area of growing interest among state and local governments, policy advocates, and researchers.  The paper uses a longitudinal sample of youth aging out of foster care to examine the impact of services and supports that build financial capability on economic well-being outcomes. 

METHODS: Data are from youth (n=829) participating in an experimental evaluation of Independent Living Services.  Each youth is interviewed three times over a two-year period.  The study exploits variation created by random assignment into Independent Living Services to explore the extent to which the receipt of financial capability supports impacts financial stability and experiences of economic and material hardship over a two-year period.  Separate analyses utilize an instrumental variables approach and a difference-in-difference analysis to estimate effects.

RESULTS: Preliminary results suggest increased receipt of financial capability services is related to improved financial stability and reduced hardship among these vulnerable youth.  Youth who received high levels of financial capability supports are 12.4 percentage points more likely to have a checking account and 12.1 percentage points more likely to have a savings account compared to youth receiving minimal financial capability supports.  Checking and saving account balances appear to be slightly larger among youth with high financial capability supports but these results are not statistically significant.  There is also no difference in rates of youth having credit cards.  The high financial capability group is less likely to report several hardship measures: having their phone disconnected [-.098, p-value 0.06], using a food pantry [-0.156, p-value 0.06], and going hungry because they could not afford food [-.105, p-value 0.05].  There is no evidence that financial capability services impact the likelihood of eviction or homelessness.    

IMPLICATIONS: Youth that exit foster care present a great challenge to governments and social service systems.  In the absence of family, the state is responsible for preparing them to survive as independent adults.  Policies which promote the integration of financial capability services into transitional and independent living services and other programs serving foster youth may have particular merit.