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