Financial Coaching A Proven Approach to Building Consumer Financial Capability
Many Still Struggling to Achieve Financial Well-Being
Financial Freedom to Make Choices Greatly Limited for Many Families
Control over day-to-day finances → HH income poverty rate 14%, → Underemployment 12.5%→ 1 in 4 jobs in US is low wage
Capacity to absorb a financial shock → 44% of American households are “liquid asset poor”
Be on track to meet financial goals→ Homeownership rates down at 63.5%→High student loan debt→ Only 45% of workers saving for retirement
A Complicated Picture
• Living paycheck to paycheck• Less likely to need the most complicated services• Few financial assets• Eligible for public benefits or special private programs• Credit management• Lack experience with financial institutions or products• More pressure on their time and resources
Check out www.usfinancialdiaries.org/households
Creating positive financial actions
and healthy financial behaviors
Increasing financial knowledge and
confidence
Applying financial knowledge and
skills
Increasing access to financial products
and services
Financial Capability
Education + Coaching + Access = Financial Capability
• Set of tangible outcomes
• Interrelated behaviors
• How people manage resources + make decisions
• Holistic
• Behavior change (what a person does) + knowledge gain (what a person knows)
54% Clients with no savings started to save
Median savings $668
48% Clients with some savings initially increased savings
Median increase $938
55% Clients with unsecured debt decreased debt
Median decrease $3,005
47%Clients raised their credit scores Mean increase
of 59 points
96% Clients who did not know how to obtain a credit report gained that knowledge
97% Clients who did not understand a credit report gained that knowledge
77% Clients who didn’t know how to build or improve their credit attained that skill
Key Findings: Knowledge
47% Clients who initially didn’t feel they managed money well felt more confident
38% Clients who initially didn’t feel in control of their finances felt more capable of doing so
62%Clients who reported feeling stressed about their financial situation no longer felt that way after participating in coaching
30% Clients became more confident in their ability to weather a financial crisis should it occur
• Financial coaching is a flexible, adaptable approach
• Coaching can be used in a range of different programs
• Organizations should choose an approach that:
- Supports their mission
- Matches their program and staff resources
- Strengthens existing service offerings
Key Elements of Program Design
Key Elements of Coaching
Focus on long-term outcomes
Ongoing, systematic, collaborative Supports new behaviors
Buildings knowledge and skills
Steps1. Goal Setting2. Action
planning3. Monitoring
Counseling vs. Coaching
Counseling
Definition: Service aimed at providing specific information and guidance intended to solve a defined event or problem.
Focus: Addresses specific issues or events through knowledge transfer and skill development.
Characteristics: Practitioner-driven process that provides a framework to educate, offer expertise and feedback.
Coaching
Definition: Service aimed at helping clients focus on behaviors to achieve self-defined financial goals
Focus: Achieving client-determined goals an long-term outcomes through behavior change.
Characteristics: Client-driven process. Provides a framework for goal setting, assessment, action planning and accountability.
Primary Traits of a Good Coach
• The ability to establish and build trust• The ability to communicate via
active listening and powerful questioning• The ability to follow through
and monitor progress• The ability to encourage and
motivate
• University of Wisconsin Extension, Center for Financial Security
DEMO
What is one short-term financial goal you have?
Where are you now in relation to your financial goal?
What are some action steps you can take now to move you toward your goal?
A Coach Facilitates the Client’s Journey by…
• Helping clients to articulate “there”
• Helping clients to explore and discover “here”
• Designing a roadmap and planning incremental steps to get from here to there
Asking Powerful Questions
• Be genuinely curious
• Ask powerful, open questions
• Avoid leading questions
• Use closed questions strategically
Coaching ModelsBest Practices from Around the Country
Coaching Program Models
• Coaching following financial education
• Coaching linked to eviction prevention
• Coaching integrated across multiple programs
• Group coaching
Coaching Follows Financial Education
• NHS Phoenix triages customers coming for home ownership classes.
• Customers who are more than 6 months from purchasing home referred to financial education classes
• In workshops, customers do budget worksheet and goal setting
• 1:1 coaching to focus on personal circumstances: goals and action planning
Example: Community Housing Works (CHW) in San Diego• Residents with eviction notices due to late rent payment
referred to financial coach• Crisis is opportunity for coach to build trusting relationship
with resident• Coach and resident develop repayment plan, approved by
property management• Coach and resident continue meeting until rent is fully paid• Many residents continue with Financial Health Club and
coaching to reach other financial goals: eligible for a matched savings program if they continue in the program.
Financial Coaching and Successful Renters
Coaching Integrated into an Existing Service
• EXample: CDC of Long Island, Centereach, New York
• Coaching offered as part of “Financial Fitness” classes• Small coaching staff• Partner with Credit Union and Greenpath Credit Union
Working Together for Strong Communities
NeighborWorksCenter forHomeownershipEducation andCounseling
Example: The Neighborhood Developers in Chelsea, MA•Developed a Financial Health Club• Incorporate Coaching approaches in Financial Education classes•Partnership for Career Coaching
Group Coaching
Financial Capability at NeighborWorks America
Take part in Financial Capability training and certification
Learn about Success Measures financial capability outcome evaluation
Learn more about financial coaching as an effective approach to building financial security through our project brief series
http://www.neighborworks.org/Homes-Finances/Financial-Security