Formal and Informal Financial Coaching for Young Adults Emerging from Foster Care

Background & purpose: Each year about 25,000 young people exit foster care without achieving a permanent outcome, “aging out” to face elevated risks of homelessness, early parenthood, poor health outcomes, and incarceration (DHHS, 2016; Courtney & Heuring, 2005). These young people often struggle to maintain employment and postsecondary education programs, and face a fraught transition to adulthood (Hook & Courtney, 2011). Their financial lives can be especially challenging, as young people struggle to earn income, save money, and spend wisely (Peters, Sherraden & Kuchinski, 2016). Without stable families, these youths and young adults tend to lack the financial socialization and guidance enjoyed by their peers (Sherraden, Peters, Wagner, Guo, & Clancy, 2013). This paper illuminates the role that professionals can play in providing formal and informal financial guidance to these vulnerable emerging adults.

Methods: Research participants included young people participating in an asset building program, Opportunity Passport^TM, which is available to current and former foster youths in several US jurisdictions. In 2016, researchers conducted semi-structured interviews with 28 participants in four states. All but two of the one-on-one interviews took place in person (two were phone interviews), each lasting between 40 to 95 minutes. Interview questions probed program participation, financial activity, efforts to build financial assets, and guidance (formal and informal) received by participants in making financial decisions. Interviews were recorded, transcribed, and analyzed using NVivo® software. Researchers drew on prior research to develop themes that were elaborated in an iterative process involving coding interviews, revising categories, and recoding.

Findings: Sites varied in the ways that they sought to provide financial guidance. Most did so informally, relying on caseworkers to advise participants on budgeting and to develop financial capability. Caseworkers, however, differed in their expertise and willingness to address financial behavior. One site employed a formal “financial coaching” program through a local agency partner, which assigned a dedicated coach to each participant. Coaches were specially trained to provide financial guidance to economically disadvantaged populations. They provided initial consultations and remained available to provide guidance for months thereafter. Participants who took advantage of coaches reported high levels of satisfaction and trust. Despite the availability of professional guidance around financial issues, however, findings suggest that young people often did not turn to professionals for help, even when considering major financial decisions or at times of financial distress, and, overall, struggled with developing financial capability.

Conclusions and Implications: The study findings suggest the promise of providing prophylactic financial guidance to foster youths who age out of care through formal coaching models. With training, caseworkers may also be instrumental in developing financial capability. However, such guidance is helpful only insofar as emerging adults with experience in foster care have access to capital, financial products that fit their needs, and monetary support as unexpected expenses arise (e.g., emergency savings accounts). Study findings suggest the need to continue exploration of financial coaching models for young people emerging from care to help develop financial capability, an essential responsibility of the state, given today’s complicated financial landscape.