2. Outreach and Goal-Setting
3. Case Management / Coaching
4. Increasing Earnings
5. Building Financial Capability
6. FSS Infrastructure
5. Building Financial Capability
In this module you will learn:
Assets are savings and possessions of value (e.g., car, house, stocks and bonds).
Why assets matter:
FSS © 2017 | U.S. Department of Housing and Urban Development
This video clip describes how asset-building can help shape the mindset of FSS participants and support achievement of their goals.
Financial Capability is the know-how and resources to make good financial decisions. The following are important building blocks of financial capability:
Together, financial capability and asset-building through increased earnings can help FSS participants achieve long-term goals.
Financial capability skills include how to make and stick to a budget, avoid and reduce debt, and save to meet short- and long-term goals. These can skills help FSS participants:
Accumulating assets built through increasing earnings from employment can help FSS participants achieve such goals as homeownership, starting a small business, obtaining post-secondary education, and buying a car. Most of these assets – for example, post-secondary education and a car –can in turn help FSS participants obtain higher-paying jobs, contributing to higher incomes.
Growing financial capability helps low-income participants avoid costly financial pitfalls that maintain a cycle of debt and poverty.
When participants have healthy credit and access to safe, affordable banking products, they can avoid expensive and risky ways of accessing money and credit (e.g., non-bank check-cashing and payday loans).
Financial health and capability are closely related to other areas of personal, professional, and financial opportunity. For example, landlords often check credit reports and scores before leasing an apartment, and employers often check these when evaluating a job applicant for employment.
This video discusses the importance of helping FSS participants improve their credit scores.
The escrow account ensures that asset-building is built in to all FSS programs, as the account can be used to support interim goals and/or grow into a substantial asset for successful FSS graduates. But as described later in this module, there are many other steps that FSS coordinators can take to help FSS participants build assets and financial capability.
Here are some of the reasons why it’s important to focus on helping FSS participants build assets and financial capability:
As described in the video, helping a resident to improve his or her credit score can lead to an “early win” that can help FSS participants build and maintain motivation to achieve their long-term goals.
A focus on asset-building and financial capability can be beneficial at each stage of the FSS program. For example:
A participant’s ultimate plans for the use of the escrow funds should not be included as an Individual Training and Services Plan (ITSP) goal since participants need to achieve all of their goals in order to graduate and access their escrowed funds.
In the video clip, an FSS practitioner describes why she asks FSS participants to identify specific plans for how they will use their escrow accounts. These plans are not binding, but help to increase motivation for participants to achieve their goals.
More information on many of these topics is provided later in this Module.
While some FSS programs provide financial capability services – such as financial education, financial coaching, budgeting, and credit counseling – directly to participants, most FSS program coordinators use service referrals as a primary means of helping participants build financial capability. For example, depending on participant needs and available partners, FSS coordinators may refer participants for financial education and budgeting support, credit or debt counseling, homeownership counseling, and to partners who can provide a free or low-cost checking or savings account.
In this video clip, an FSS practitioner describes the experiences of some of her FSS participants in working with a consumer credit counselor.
In addition to non-profit asset-building organizations and credit counselors, financial institutions – including credit unions and private, for-profit banks – can also be good partners. Among other services, financial institutions can provide low- or no-cost checking to FSS participants, affordable home mortgages, and financial education workshops. Some will be local organizations, while others will be regional or even national -- for example, a local or regional branch of a national bank.
In this video a nonprofit agency describes how they partner with credit unions and banks to provide access to affordable financial services to families in the FSS program.
This table, distilled from Administering an Effective Family Self-Sufficiency Program: A Guidebook Based on Evidence and Promising Practices, describes a broad range of organizations that can provide services to help FSS participants build financial capability:
Here are a few national resources for finding local partner agencies:
In addition to making referrals to organizations that help residents build financial capability, FSS coordinators can incorporate financial coaching into case management or coaching that the FSS coordinator already provides. The simplest way to do so is to talk with participants about their financial concerns, resources, practices, and goals during the periodic check-ins FSS coordinators hold with participants. Incorporating these questions into regular check-ins allows FSS coordinators to note whether participants’ financial health or financial practices have progressed or changed.
Some FSS programs may wish to integrate financial coaching more explicitly into the case management or coaching they provide. Under this model, the FSS coordinator might provide one or more of the following services:
This approach can help participants make stronger and faster progress toward building financial capability and organize their financial lives to form and maintain a habit of saving.
Successful financial coaching within an FSS program often follows a client-centered coaching model (more on a client-centered approach in Chapter 3). The coordinator assesses the participant’s needs and priorities, works with the participant to help establish goals based on the participant’s priorities, and helps the participant identify interim steps toward those goals. FSS coordinators may provide some of the service to help the participant progress.
Compass Working Capital, a nonprofit asset-building organization based in Boston, integrates financial coaching into the FSS programs it manages.
This video describes their overall approach to incorporating financial education and financial coaching into the FSS program.
The following are some of the main activities included as part of financial coaching for FSS participants. As noted above, these can be provided through referrals to outside service providers or integrated into the case management or coaching provided directly by the FSS coordinator (click the arrows to expand the content):
Credit and Debt
Review credit reports and credit scores with participants, soon after enrollment and periodically, in order to help participants reduce their debt and improve their credit scores. This requires obtaining credit file information from a credit bureau (such as Equifax, Experian, or TransUnion). Participants can obtain free credit reports from annualcreditreport.com, and free FICO credit scores from several credit card providers. (However, programs that provide financial coaching often pay a fee to access this information more regularly and consistently.) Financial coaches can help participants get errors in their credit files corrected (or can refer the participant elsewhere for this service) and can work with the participant to prioritize and manage debt and create a plan for activities to build or improve credit scores.
This can include helping participants create and revise budgets, providing encouragement that participants can reach their goals over time, and helping to remove barriers to good money management. Common barriers include being daunted by the task of managing scarce resources or simply not having the bandwidth to make tradeoffs on a moment-by-moment basis throughout the day, week, and month. Financial coaches can help participants develop budgets identifying their spending priorities and share rules of thumb for how to proceed when facing a tradeoff.
Accessing Mainstream Financial Products
During the initial assessment, FSS coordinators can ask participants about their financial practices and resources, including whether they use or have access to a checking and/or savings account, whether they have affordable sources of credit or savings for an emergency, and whether they use costly/high risk financial products or services (e.g., payday loans, check-cashing for a fee). Coordinators can give participants tailored information on predatory vs. high quality products and services, stress the importance of using high quality ones, and refer participants to local or partner financial institutions.
Most FSS coordinators do not have a background in financial education, financial coaching, or credit counseling, so FSS programs interested in providing more direct financial counseling services will need training and other resources for staff members.
Where in-person training is not an option, resources that are available freely online may be helpful. A few examples:
Your Money, Your Goals is a toolkit provided by the Consumer Financial Protection Bureau (CFPB) to assist social service staff in discussing financial health and practices with participants, and provide financial coaching or education, and credit counseling activities. The toolkit is modular (i.e., service coordinators can incorporate any or all topics from the toolkit).
Building Financial Capability: A Planning Guide for Integrated Services is an interactive guide to help community-based organizations interested in integrating financial capability services into existing programs (e.g. housing, job training, or Head Start), created by the HHS-funded Assets for Independence initiative. There is a video training series companion to the guide.
Assessment tools from the Center for Financial Services Innovation include Measuring Financial Health: 8 Key Indicators, a 1-hour webinar geared to help organizations measure client financial health.
The Change Machine is an online financial coaching platform with self-paced lessons covering a six-part framework for financial security, including tools, tips, and coaching strategies tailored for coaches working with specific financially vulnerable populations.
Virtual Goal Coach is an online tool containing links to resources that can help families achieve their employment, financial, education and homeownership goals.
PowerPay provides tools to families to develop a personalized, self-directed debt elimination plan.
Vertex42 provides free budget templates, financial calculators and other debt reduction and money management tools. This NerdWallet article reviews additional budgeting and savings tools – many for free – designed to help consumers save more and spend less.
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