Financial education and counseling

Strategy overview

  • Setting and achieving financial goals: Financial education and counseling programs provide coaching, coursework, tools, and more for participants to improve their short- and long-term financial wellbeing. Goals typically include debt reduction, building savings, opening safe bank accounts, establishing and improving credit, budgeting, and more.
  • Reaching a range of clients: While some programs are available to all residents, others are highly tailored to a specific subset, such as high school students and their families, victims of domestic violence, justice-involved individuals, residents in subsidized housing, and others. The target population often dictates delivery location, which may be within a government office, a community-based organization, a shelter, or other safe and public spaces.
  • Professional financial coaching: Trained, professional financial coaches or counselors often deliver the model through one-on-one coaching sessions; to reach broader audiences, coaches or financial professionals may also teach financial education classes or budgeting workshops. Coaches work directly with clients to set specific financial goals and then develop strategies for clients to achieve them. In many cases, coaches also track outcomes to help ensure clients have a mechanism for accountability.
  • Recruitment and delivery alongside partners: Oftentimes, programs are delivered as part of a partnership, such as between a city-run financial empowerment center, a nonprofit multiservice agency, and a school district. Each partner can, in turn, help identify funding sources and potential client pools. Strategic partnerships allow programs to reach more residents and share overlapping costs (like marketing and office space). In some cases, these partnerships may help achieve a “supervitamin effect,” wherein complementary services delivered in tandem increase the impact of one another.

Financial education and counseling programs have demonstrated some positive results in two randomized control trials, in addition to strong anecdotal evidence. Further rigorous evaluation is needed to confirm effects. 

  • A comprehensive evaluation on the impacts of financial coaching programs conducted by the Urban Institute in 2015 (including a randomized control trial) found positive but limited results: participants had increased total savings; reduced debt; and in increased likelihood of maintaining a budget.

  • A 2016 randomized control trial on financial literacy programming for economically vulnerable women found a significant increase in self-reported financial knowledge and behaviors.

  • A 2017 internal evaluation of financial empowerment centers found strong anecdotal evidence that clients increased their credit scores, reduced their debt, and increased their savings.

Before making investments in this strategy, city and county leaders should ensure it addresses local needs.

The Urban Institute and Mathematica have developed indicator frameworks to help local leaders assess conditions related to upward mobility, identify barriers, and guide investments to address these challenges. These indicator frameworks can serve as a starting point for self-assessment, not as a comprehensive evaluation, and should be complemented by other forms of local knowledge.

The Urban Institute's Upward Mobility Framework identifies a set of key local conditions that shape communities’ ability to advance upward mobility and racial equity. Local leaders can use the Upward Mobility Framework to better understand the factors that improve upward mobility and prioritize areas of focus. Data reports for cities and counties can be created here.

Several indicators in the Upward Mobility Framework may be improved with investments in financial education and counseling. To measure these indicators and determine if investments in these interventions could help, examine the following:

Mathematica's Education-to-Workforce (E-W) Indicator Framework helps local leaders identify the data that matter most in helping students and young adults succeed. Local leaders can use the E-W framework to better understand education and workforce conditions in their communities and to identify strategies that can improve outcomes in these areas.

Several indicators in the E-W Framework may be improved with investments in this strategy. To measure these indicators and determine if investments in this strategy could help, examine the following:

  • Economic security: Percentage of individuals who reach median levels of wealth 10, 15, 20, and 30 years after completing their highest degree or leaving education (high school, workforce training, or postsecondary education).

  • Economic mobility: Percentage of individuals who reach the level of earnings needed to enter the fourth (60th to 80th percentile) income quintile in their state or above 1, 3, 5, 10, and 15 years after completing their highest degree or leaving education (high school or postsecondary).

  • Unmet financial need: Average net price (cost of attendance minus grants, scholarships, or tuition waivers from all sources) minus average expected family contribution (EFC), as calculated by Free Application for Federal Student Aid (FAFSA).
  • Student loan repayment: Percentage of student borrowers in the following repayment categories, as defined on the College Scorecard—making progress, paid in full, and deferment—1, 2, 3, 5, and 10 years into the repayment phase of the loans.
  • Cumulative student debt: Median student debt.
  • Prioritize hiring high-quality coaches: Coaches are at the foundation of most financial education and counseling programs. They often deliver nearly all components of the program, from client recruitment to meeting with residents to evaluating outcomes. Conduct a broad, rigorous search for trained, professional coaches who also demonstrate a strong familiarity with the community in which the program operates.
  • Integrate into existing social service operations: Partnerships with social service agencies, community-based organizations, and other nonprofits allows financial education and counseling programs to reach more potential clients, create referral networks, and reduce transit and time barriers for clients. A particularly valuable form of partnership is site co-location, which allows clients to access key services like food pantries, health clinics, and temporary housing alongside financial counseling.
  • Invest in data capacity to build trust among clients and funders: Successful financial education and counseling programs include a robust data collection and evaluation component, such as tracking outcome data like debt reduction and increased savings. Doing so can have a strong impact for a range of stakeholders; for clients, the data can serve as a motivator and strengthen a relationship with their coach; for funders, such data can demonstrate success; and for the program itself, such data collection can be used to measure and refine the program for continuous improvement.
  • Take creative approaches to client recruitment and engagement: Depending on the target population and delivery site, coaches can take nontraditional approaches to cultivating relationships with new clients. For instance, high school students are often more likely to respond to text messages than emails; social service recipients may prefer an in-person conversation at a community event before scheduling an individual session. Programs can also set aside funding for small incentive programs (such as Amazon gift cards), that can be used to encourage repeat visits and reaching small goals (like opening a bank account).

Evidence-based examples

Provides free financial education and counseling to residents
Stable and healthy families
Teaches program participants key financial concepts and skills, like budgeting, managing debt, and setting and achieving financial goals
Stable and healthy families
Grameen America provides microloans, financial training, and other services to women living in poverty planning to start or expand a small business.
High-quality employment