Financial Capability and Supportive Relationships in Older Youth Transitioning from Foster Care to Adulthood

Background and Purpose: Financial capability is a crucial skill set for youth to develop as they approach adulthood. This is especially true for older youth in foster care, as they often leave care with fewer supports to rely on. The Foster Care Independence Act of 1999, which provides federal funding to all states to provide services to support youth transitioning from foster care to adulthood, specifically identifies financial skills as an area that should be focused on. However, little is known about how youth are faring in relation to financial capability as they transition out of foster care and into adulthood, and what factors are associated with stronger financial capability for youth leaving care.

This study uses the financial capability core competency framework developed by the US Financial Literacy and Education Commission to assess financial capability in a sample of older youth in foster care. The framework includes five financial capability core competencies: Earning, Spending, Saving & Investing, Borrowing, and Protecting (assets).

This study has two aims. First, it aims to assess how youth in care are faring in relation to the achievement of financial capability, what types of finance-related supports they are accessing, and whether older youth (those in extended foster care) are more likely to have achieved indicators of financial capability than younger youth in care. Second, it aims to assess whether there are associations between financial-related supports and indicators of financial capability.

Methods: Ninety-four youth aged 14 to 20 and still in the foster care system in one northeastern city in the United States participated in this study. Participants took a 1.5-hour telephone survey about their preparation to transition from foster care to adulthood, and received $100 for their participation. Data collection took place January through December 2014. Analyses included both descriptive and regression (binary logistic and multiple linear) analyses.

Results: Older youth had achieved multiple indicators of financial capability at a higher rate than younger youth, including indicators related to Earning (t(94)=-4.122, p=0.000), Spending (Χ²(1) = 13.07, p=0.000) and Saving/Investing (Χ²(1) = 3.96, p<0.05). Having someone who helps learn about finances and make good financial decisions was associated with the Earning and Spending indicators of financial capability (B=1.66, β=0.20, p<0.05 and OR=3.24, p<0.05, respectively), as was participating in an independent living program (B=2.79, β=0.34, p<0.01 and OR=3.59, p<0.05, respectively).

Conclusions and Implications: Similar to other outcome domains (such as education) for youth transitioning from foster care adulthood, having caring adults to learn from and ask for advice was indicative of stronger financial capability in older youth in foster care. In addition, involvement in independent living programs seemed to be a valuable experience for youth in relation to building financial capability. However, some financial capability core competencies had weaker associations with these supports. The findings of this study inform several recommendations for both policy and practice for strengthening financial capability for youth transitioning from foster care to adulthood.