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NO. 87 SPRING 2015

Financial Education and Literacy Issue

PUBLISHED BY THE
COMMUNITY DEVELOPMENT
STUDIES & EDUCATION
DEPARTMENT OF THE
FEDERAL RESERVE BANK
OF PHILADELPHIA

INSIDE:
2—

Message from the
Community Affairs Officer

3—

D2D Tests Innovations
on Prize-Linked
Savings, Mobile Phone
Applications, and Prepaid
Cards for Financially
Vulnerable Consumers

6—

Delaware Financial
Education Program
Enlists State Agencies,
Nonprofits, and
Businesses

8—

Lessons from the Keys
to Financial Success
Program

10 — Spotlight on Research:
The Influence of Financial
Literacy on High-Cost
Borrowing

A C O M M U N I T Y D E V E LO P M E N T P U B L I C AT I O N

CASCADE
Lessons from the Jim Casey
Youth Opportunities Initiative*
By Keith L. Rolland, Community Development Advisor
One of the nation’s only programs that
uses individual development accounts
(IDAs)1 to build the assets of young people
is overseen by the Jim Casey Youth Opportunities Initiative, a private foundation
in St. Louis, MO. The IDAs are part of a
program called Opportunity Passport that
was developed for young people who are
“aging out” of foster care. Started in 2001,
Opportunity Passport is being implemented in 18 states2 by 13 nonprofits, four
public agencies, and one university.

17 — Mapping Our Community

The initiative and other advocates for
youth in foster care have helped persuade state and federal agencies to
extend the age that young people in the
system can receive services. Most youth
leave foster care at about age 18, although some states provide some continued services up to age 21.3

18 — Rhode Island Nonprofit
Launches Financial
Coaching to Increase
Asset Matches

The initiative, which is named after the
late James (Jim) E. Casey, founder of
United Parcel Service, will become a new

12 — Clarifi Offers Financial
Services at Health
Centers, Adds Coaching
and Mentoring
16 — Perspective on
Foster Care Trends

division of the Annie E. Casey Foundation
(AECF) in July 2015.
The Foster Care Population
One of the most extensive research studies on young people who “age out” of
foster care is the Midwest Evaluation of
the Adult Functioning of Former Foster
Youth (known as the Midwest Study).4 The
longitudinal Midwest Study points out that
many young people make a gradual transi...continued on page 14

* The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or
the Federal Reserve System.
1
Individual development accounts (IDAs) are matched savings accounts that help people with modest means save
toward the purchase of a lifelong asset, such as a home. See http://cfed.org/programs/idas/.
2
The 18 states include Pennsylvania and Delaware. In Pennsylvania, the initiative is being implemented by the
Allegheny County Department of Human Services. In Delaware, it is being implemented on a statewide basis by
the Delaware Center for Justice.
3
Twenty-five states and the District of Columbia have passed legislation to extend foster care beyond age 18 with
federal matching funds under the Fostering Connections Act, according to initiative staff. A few of the states,
including many of the most populous states (Pennsylvania among them), are not in the implementation stage yet.
Other states, such as Delaware, have extended foster care with state dollars only.
4
For the report, see http://ow.ly/L5ni5.

www.philadelphiafed.org

CASCADE
FINANCIAL EDUCATION AND
FINANCIAL
LITERACY
EDUCATION AND LITERACY
No. 87
Spring 2015

Cascade is published four times a year by
the Federal Reserve Bank of Philadelphia’s
Community Development Studies and
Education Department and is available at www.
philadelphiafed.org. Material may be reprinted
or abstracted provided Cascade is credited.
The views expressed in Cascade are not
necessarily those of the Federal Reserve Bank
of Philadelphia or the Federal Reserve System.
Send comments to Keith L. Rolland at 215-5746569 or keith.rolland@phil.frb.org. To subscribe,
go to www.philadelphiafed.org/publications/.

COMMUNITY DEVELOPMENT STUDIES
AND EDUCATION DEPARTMENT
Noelle S. Baldini
Community Engagement Associate
215-574-3722; noelle.baldini@phil.frb.org
Kenyatta Burney
Senior Administrative and Budget Assistant
215-574-6037; kenyatta.burney@phil.frb.org
Jeri Cohen-Bauman
Lead Administrative Assistant
215-574-6458; jeri.cohen-bauman@phil.frb.org
Lei Ding, Ph.D.
Community Development Economic Advisor
215-574-3819; lei.ding@phil.frb.org
Eileen Divringi
Community Development Research Analyst
215-574-6461; eileen.divringi@phil.frb.org
Andrew T. Hill, Ph.D.
Economic Education Advisor and Team Leader
215-574-4392; andrew.hill@phil.frb.org
Erin Mierzwa
Department Manager
215-574-6641; erin.mierzwa@phil.frb.org
Naakorkoi Pappoe
Community Development Research Analyst
215-574-3492; naa.pappoe@phil.frb.org
Keith L. Rolland
Community Development Advisor
215-574-6569; keith.rolland@phil.frb.org
Theresa Y. Singleton, Ph.D.
Vice President and Community Affairs Officer
215-574-6482; theresa.singleton@phil.frb.org
Marvin M. Smith, Ph.D.
Senior Community Development
Economic Advisor
215-574-6393; marty.smith@phil.frb.org
Sydney K. Taylor
Community Engagement Associate
215-574-3854; sydney.taylor@phil.frb.org
Keith Wardrip
Community Development Research Manager
215-574-3810; keith.wardrip@phil.frb.org
Todd Zartman
Economic Education Specialist
215-574-6457; todd.zartman@phil.frb.org

Message from the
Community Affairs Officer
Over the past year, I have become addicted to my fitness tracker. I check it
several times a day to see how close
I am to reaching my 10,000-step goal.
Recently, I went away on a business
trip and accidently left my tracker at
home. By the end of that first day, a
close friend, who also uses the same
tracker, e-mailed me asking, “What’s
wrong? Aren’t you walking today?”
For me, it is that combination of technology and the personal relationship
that keeps me focused on my fitness
goals, and the articles in this issue of
Cascade illustrate how both strategies
can be effective in helping people manage their financial goals.
Mobile tools are increasingly being developed and used to encourage people
to save and manage their money more
effectively. Across the country and
around the world, technologists and
financial capability experts are creating
innovative products and services that
can help individuals better monitor
their spending and credit scores, as
well as set goals and track behaviors.
These innovations reflect the broader
trend of mobile device usage and may
help address some of the challenges
associated with access to financial
products and services.
While there is certainly a growth in
the number of financial apps and
other mobile tools, the use of financial
coaches and mentors is also growing.
Our opening article on youth aging
out of foster care is an enlightening
look at the financial lives of this population. As noted by researchers, young
people aging out of foster care “have a
very small margin for error for managing their financial lives....” As young
adults, they can find themselves with-

Theresa Y. Singleton, Ph.D.

Vice President and Community Affairs Officer

out a home, family, and financial supports. In an evaluation of a program
that provides these young people with
financial incentives and savings products, it was found that the most critical
ingredient for the financial success of
young people was “having at least one
reliable and informed adult in their life
to help them navigate decisions that
have financial implications.” The mentor made the difference.
Consumers have access to a range of
resources to help them improve their
financial knowledge and behaviors —
from online tools and apps to financial
counseling and coaching. While these
technology-based and human-centered
approaches come with trade-offs related to cost, efficiency, and personalization, they can be used to meet specific
needs in a person’s financial life cycle.
The articles in this issue of Cascade provide some insight as to how these tools
are being integrated into programs to
benefit consumers.

D2D Tests Innovations on Prize-Linked Savings, Mobile Phone
Applications, and Prepaid Cards for Financially Vulnerable Consumers*
By Keith L. Rolland, Community Development Advisor

The Doorways to Dreams (D2D)
Fund, a 15-year-old nonprofit headquartered in the Boston area, designs and develops innovations that
strengthen the financial opportunity
and security of financially vulnerable
consumers. D2D’s innovations have
included work on prize-linked savings (PLS),1 phone applications, and
prepaid cards. D2D has also developed
Financial Entertainment, a suite of
casual video games that teach financial concepts. Cascade asked Timothy
Flacke, executive director of D2D,
about the organization’s latest work.
What is D2D’s experience
with PLS strategies?
Clearly, Americans need to increase
their savings. The personal savings
rate of Americans ranged from a
low of 10.1 percent to a high of 13
percent from 1959 to 1978. After
several years above and below 10
percent, the savings rate has been in
the single digits since 1985, ranging
from 2.5 percent to 8.9 percent. In
2014, it was 4.9 percent.2 One promising way to ensure that consumers
save is to make the act of saving fun
and gratifying. We think that a little
fun and the excitement of winning
can motivate consumers to save, and
that drives our efforts around PLS.

PLS products are used in 22 countries, including the United Kingdom
where they were launched 50 years
ago.3 The first significant use in the
U.S. occurred in 2009, when D2D
and its partners helped eight Michigan credit unions establish Save to
Win (STW).4 The product is now
available to more than 1.3 million
consumers in four states: Michigan,
Nebraska, North Carolina, and
Washington. STW offers credit union
members certificates of deposit in
which members who deposit $25
or more are automatically entered
in raffles for monthly and annual
prizes. Most of the accounts pay a
market rate of interest, and members
keep the savings and interest whether or not they win a prize.
Significantly, 81 percent of STW
accounts active in December 2012
were rolled over from 2012 to 2013,
indicating that many members kept
their savings in the accounts — and
that PLS programs can create lasting
savings behavior. Through the end
of 2013, more than $94 million had
been deposited in PLS accounts in
62 credit unions in four states.5 The
cumulative number of PLS accounts
rose from 11,666 in 2009 to 50,076 in
2013, and we believe these numbers
will continue to grow.

This growth will be facilitated in
part by the recently enacted American Savings Promotion Act (ASPA).
Passed with bipartisan support
in December 2014, ASPA changes
federal law that prevented banks and
thrifts from offering PLS products.
ASPA does not preempt state law, so
legislators in states where PLS products are not permitted will still need
to pass policy that allows for PLS
products. With the passage of ASPA,
we see growing interest across the
country and are excited about the
potential for PLS products to reach
more consumers through all types of
financial institutions.
PLS strategies are financially sustainable and invite further innovation.
For example, D2D believes that
state lotteries are a unique and ideal
channel through which to offer PLS
products, and the organization is
also exploring ways to apply PLS
to prepaid cards, personal financial
management tools, and U.S. savings
bond purchases.
To what extent are mobile devices,
including smartphones, providing
underserved consumers with access
to affordable, high-quality financial
products and services? What are the
issues and challenges in this area?

* The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
1
Prize-linked savings (PLS) is an internationally tested concept in which consumers are rewarded for good savings behavior with chances to win prizes;
PLS accounts are typically offered by insured financial institutions.
2
To view the seasonally adjusted annual savings rate, see the Federal Reserve Bank of St. Louis’s FRED Economic Data on the Personal Saving Rate,
available at http://ow.ly/JQpsD.
3
For more information on PLS in the United Kingdom, see NBER Working Paper No. 16433 “Making Savers Winners: An Overview of Prize-Linked
Savings Products,” pages 9–14, available at www.nber.org/papers/w16433.
4
For more information about the STW program, see www.savetowin.org/.
5
See D2D Fund, Save to Win Impact 2009–2013, January 9, 2015, available at http://ow.ly/JQmUS.

FINANCIAL EDUCATION AND LITERACY

prototype will be evaluated in 2015
by D2D in consultation with Michael
E. Staten, director of the University of
Arizona’s Take Charge America Institute for Consumer Financial Education and Research.
What has D2D learned about using
prepaid cards to create savings opportunities? What are the related
issues and challenges?

Innovators presented new products at a FinCapDev Hackathon organized by the Doorways to
Dreams Fund in New York City in March 2014.

Products using mobile phones build
on Americans’ strong attachment
to their phones. As the Board of
Governors of the Federal Reserve
System,6 the Pew Charitable Trusts,7
and others have reported, financially
vulnerable populations, including
the underbanked, have high rates
of mobile phone use, including for
financial services.
D2D and the Center for Financial
Services Innovation (CFSI) have
administered “hackathons” and
competitions to spur development of
mobile apps that improve financial
access and capability for underserved consumers.8 The FinCapDev
Competition (held in 2013 and 2014)
and the MyMoneyAppUp Challenge (held in 2012) produced apps
for consumers, and the SmallBizDev Hackathons produced apps

for small business owners. In 2014,
the FinCapDev Competition led to
the development of 10 mobile app
innovations for financially vulnerable populations.9 MyMoneyAppUp,
which D2D and CFSI developed with
the U.S. Department of the Treasury,
identified the best ideas and product
concepts for next-generation mobile
tools to help consumers make good
financial choices.
D2D is also developing apps for
savings, including a prototype for a
“Fitbit-style” activity tracker, which is
a “gamified” system for web and mobile platforms. The system can link to
an existing financial product, pairing
a layer of fun with useful tools, such
as goal-setting and tracking tools.
Users see a visual display of their
financial habits and are rewarded for
taking action related to saving. The

D2D believes that prepaid cards are
well-suited platforms for savings
innovations. Prepaid cards have
already proven to be useful tools
for managing individual and family budgets, but we think they can
be designed to help consumers save
money, including for emergencies
such as car breakdowns, household
repairs, and medical illnesses. D2D
is exploring multiple savings strategies in the prepaid space, including
reframing and branding a savings
“pocket” for financial emergencies,
offering a PLS feature, and gamifying a savings option.10
What has D2D learned about the
potential that video games have in
building financial capability?
D2D developed a suite of financial
education video games (Financial
Entertainment) because good games
can be immersive, reduce players’
anxieties, and deliver key financial
concepts in an interactive, enjoyable way. Financial Entertainment
titles cover topics such as building
savings, managing debt, and help-

See the Board of Governors of the Federal Reserve System’s report on mobile financial services, Consumers and Mobile Financial Services 2013, March
2013, available at http://ow.ly/JQdlr.
7
See the Pew Research Center’s Social Networking Fact Sheet, available at http://ow.ly/JQfuo, and Social Media Update 2014, available at http://ow.ly/
JQfRW.
8
For information about the hackathons and competitions, see Shaheen Hasan, Carolyn Hall McMahon, and Preeti Mehta, Building Mobile Apps for
Financial Capability & Access, CFSI and D2D Fund, September 2013, available at http://ow.ly/Kiq2b.
9
For information on the innovations, see Tatiana Brezina, 2014 FinCapDev Competition: Ten Mobile App Innovations for Underserved Americans, D2D Fund
and CFSI, January 2015, available at http://ow.ly/KiqC8.
10
For a report on the use of PLS with prepaid cards, see http://ow.ly/KirkJ.
6

ing consumers split tax refunds into
savings. Two Financial Entertainment titles, Bite Club and Farm Blitz,
have been customized through a
partnership with office supply retailer Staples, which made the games
available to its workforce to improve
employees’ financial wellness. In the
game titles, D2D and Staples embedded opportunities for employees
to take real-world actions, such as
adjusting a 401(k) salary deferral rate
while playing Bite Club. The partnership highlights Financial Entertainment’s ability to feature customized
language and action-taking prompts
and encourage players to test new
financial behaviors.
D2D’s games are also being used by
teachers in all 50 states in their financial literacy lesson plans.11

D2D has found that Financial Entertainment engages users, particularly low- to moderate-income
consumers, in significant gameplay.
Through our website portal, participants engaged in more than 587,000
game sessions and more than
106,000 hours of associated financial
capability learning.
Financial education is often conducted through a combination of
classroom instruction and one-onone counseling and coaching. What
is the role of technology versus
personal intervention in achieving
financial education goals?
Technology can serve many people
in a cost-effective, sustainable way.
It can be accessible to almost anyone who wants or needs it. When

consumers are offered technologybased games or gamified experiences, they show up voluntarily
— meaning they want to play and
are motivated to do so — which
helps to reach more people and
make them more receptive to the
learning that can occur. Technology
can also be tailored to individuals,
delivering what is most relevant at
the moments of greatest impact. We
think of technology as providing a
foundation of financial capability
tools that can broadly support the
population; coaching and in-person
resources can then be layered on
top of this foundation where resources allow.
For more information, contact Timothy
Flacke at tflacke@d2dfund.org or visit
the D2D website at www.d2dfund.org/.

For information on the use of financial entertainment by teachers, see http://ow.ly/JQnBi.

Cascade to Become Primarily an E-Publication
Starting with the Summer 2015 issue, Cascade will be published primarily in
an online format to make the issue more readily available to our readers.
In addition, the electronic version of Cascade will be released four times a
year instead of three, and only the main article of each issue will be printed.
If you are presently receiving printed copies of Cascade, you will automatically
receive printed copies of only the main feature article in the future. Readers
who are not receiving printed copies can be added to the mailing list by
contacting Jeri Cohen-Bauman at jeri.cohen-bauman@phil.frb.org.
Is there a topic that interests you that we haven’t covered? If so, send
your suggestions to Keith Rolland at keith.rolland@phil.frb.org.
Our goal remains the same: to develop a resource that adds value for
community development practitioners in financial institutions, nonprofits,
and government agencies in the Third Federal Reserve District.
–The Community Development Studies and Education Department of the
Federal Reserve Bank of Philadelphia

FINANCIAL EDUCATION AND LITERACY

Delaware Financial Education Program Enlists
State Agencies, Nonprofits, and Businesses*
By Keith L. Rolland, Community Development Advisor

$tand by Me (SBM), a four-yearold program created to educate
Delaware residents about personal finance and motivate them to
achieve financial goals, is currently
being implemented by four state
agencies, seven nonprofits, and
about 50 businesses.
The program, which is a joint initiative of the Delaware Department of
Health and Social Services and the
United Way of Delaware, has the
support of Delaware Governor Jack
Markell — a longtime proponent of
financial education.
Financial Coaching
SBM relies on a financial coaching
model in which clients meet one-onone with coaches to identify financial challenges, set goals, and create
action plans. Delaware residents
learn about the availability of financial coaching through SBM’s partners in nonprofits, state agencies,
and employers. Mary Dupont, director of financial empowerment in
Delaware, said, “Our coaches take
a customer-driven approach where
they listen carefully to customers
and help them to clarify their goals
and path forward by asking questions and providing them with
information and resources.” She
added, “Our coaches can’t solve the
financial problems of the customers

they work with. The customers have
to set their own goals and carry out
action plans.” The clients’ goals tend
to focus on improving their credit,
learning budgeting skills, and reducing their debt.
According to Dupont, the most
important quality that personal
financial coaches need to have is the
ability to “establish a trusting relationship” with clients. She described
SBM coaches as compassionate and
good listeners who hold clients
accountable for their decisions.
She also noted that most of SBM’s
coaches don’t have backgrounds
in financial services. Twenty-one
financial coaches are employed at
seven of SBM’s nonprofit partners.1
SBM contracts with the nonprofits,
and they then hire the coaches. The
coaches receive their training by
attending a five-day course at the
University of Delaware, which offers
2.5 continuing education credits
upon completion.2 The training
emphasizes relationship-building,
offers skills development in budgeting and credit, and provides trainees
with opportunities to shadow experienced coaches and attend monthly
training events.
After they have received training,
the coaches lead one-hour interactive
workshops called Mind over Money.

In these workshops, the coaches
teach clients about financial products that SBM considers “consumer
friendly.” These products include
a payday loan alternative and a
security deposit loan offered by West
End Neighborhood House, as well as
a credit-building consumer loan and
a savings account for groups that
want to form savings clubs offered
by Artisans’ Bank.
Some useful resources on financial
coaching are a National Governors Association (NGA) paper on
SBM, a NeighborWorks America
study on financial coaching, and
the University of Wisconsin–Madison’s Center for Financial Security
guides and other materials on starting and operating financial coaching programs.3
Targeted Populations
SBM targets the following populations for its coaching and Mind over
Money workshops:
•

•

High school students and their
families — Financial aid specialists provide workshops on financial aid, and trained volunteers
explain how to complete the Free
Application for Federal Student
Aid (FAFSA).
College freshmen — SBM offers
a financial education course at

* The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
1
The nonprofits are the Food Bank of Delaware, Goodwill of Delaware and Delaware County, Latin American Community Center, NCALL Research,
Telamon Corporation, West End Neighborhood House, and Wilmington Senior Center.
2
The training curriculum was developed with Central New Mexico Community College.
3
An executive summary of the NGA paper is available at http://ow.ly/L2asb. A NeighorWorks study, “Scaling Financial Coaching: Critical Lessons and
Effective Practices,” is available at http://ow.ly/L2caU. The University of Wisconsin–Madison’s Center for Financial Security materials are available at
http://ow.ly/L2dkq.

•

Delaware Technical Community
College (Delaware Tech) and
Wilmington University that includes credit and budgeting.
Hispanic residents — SBM provides its services in Spanish and
covers topics such as ways to
send money to relatives in Latin
American countries.
Child care centers — SBM
provides free services to 39 child
care centers through a grant from
the Annie E. Casey Foundation.
The 50+ population — SBM is
working with the Wilmington
Senior Center and other organizations to reach residents age 50
and older.
Active-duty military personnel
and veterans — SBM serves the
unique budgeting and financial
needs of active duty personnel
at Dover Air Force Base, as well
as veterans.

Later this year, SBM plans to begin
reaching out to people receiving
workforce development services;
initially it will work with the vocational educational program targeted
to adults through nonprofits and
community colleges. The organization also plans to reach people who
are disabled.
Working with Employers
A dozen of Delaware’s largest employers, such as the Dover Downs
Hotel & Casino, ShopRite supermarkets, and the Christiana Care Health
System, offer SBM financial coaching
as an employee benefit. Many small
businesses also offer the service. In
addition, Mind over Money workshops are sometimes offered at
employer work sites.
The participating employers inform
employees about the availability of
financial coaching and usually allow
employees to meet with coaches

during work hours at their work
sites. Dupont stated that employees
who address their financial problems are more stable and productive. To protect the privacy of the
employees who seek financial
coaching services, SBM recommends that employers avoid managing the service from their human
resources offices.
Fitting Financial Education
into Organizational Goals
Dupont explained that SBM strives
to understand the employer’s goals
and priorities and then “fits” financial education services into those
goals and priorities so that they are
consistent with the organization’s
culture.
This strategy has been successfully
employed in Delaware as the following three cases illustrate:
•

•

Thirty-nine child care centers
in Delaware began adding SBM
services as an employee benefit
and service to parents, actions
that help improve the centers’
public ratings, which are part of
a state initiative to improve child
care quality.
Thirty-four of the state’s 38 high
schools started hosting SBM
financial aid workshops and
FAFSA sessions after the state
launched a campaign to boost
college enrollment.
The 24 Head Start centers in
Delaware began integrating
SBM into their programs as an
employee benefit and a service
to parents after the Administration for Children and Families,
which funds the centers, issued
guidelines recommending assetbuilding efforts.

Program Data
According to SBM, the program

served 5,626 individuals from its
inception in 2011 to mid-January
2015. Of those residents served, 72
percent are women, 53 percent are
African American, 53 percent are
employed full time, and 74 percent
earn $30,000 or less a year. In addition to the 5,626 individuals who
received coaching services, SBM
served 19,490 other individuals in
workshops, FAFSA preparation, and
free tax preparation.
SBM’s $1.9 million budget is funded
by foundations (55 percent), corporations (20 percent), public agencies
(20 percent), and participating businesses (5 percent).
Observations
Dupont observed that the state affiliation enables SBM to reach residents
throughout Delaware, while the
United Way affiliation provides flexibility, the ability to obtain nonprofit
funding, and extensive community
relationships.
She added that SBM requires “constant communication” between
participating employers and nonprofits, as well as between clients
and coaches.
Future Directions
SBM plans to have a formal workplace evaluation in 2015 and will
continue to expand its services in
Delaware. It is also exploring savings accounts in which participants
have a chance to win prizes. SBM
presently offers incentives such as
gift cards and certificates of deposit
for attending coaching sessions,
opening new savings accounts, and
other activities.
For more information, contact
Mary Dupont at 302-255-9245 or
mary.dupont@state.de.us; www.
standbymeDE.org.
7

FINANCIAL EDUCATION AND LITERACY

Lessons from the Keys to Financial Success Program*
By Andrew T. Hill, Ph.D., Economic Education Advisor and Team Leader
Since 2001, the Federal Reserve Bank
of Philadelphia, in partnership with
the University of Delaware Center for
Economic Education and Entrepreneurship, has developed and trained
high school educators to teach a
one-semester personal finance course
called Keys to Financial Success (Keys).
Since its inception, the partnership has
trained more than 350 teachers from
over 150 schools in Pennsylvania, New
Jersey, and Delaware. Each year, these
instructors teach more than 10,000
high school students in the Third District with their own courses modeled
after the Keys curriculum.
Through the Keys program, trained
educators give students the knowledge, skills, and processes required
to make sound financial decisions
and manage their own personal
finances as adults. The 52-lesson curriculum is divided into nine themes:
goals and decision-making, careers
and planning, budgeting, saving and
investing, credit, banking services,
transportation issues, housing issues,
and risk protection.1
During the past 14 years, the Keys
partners have learned a number of
important lessons about the successful implementation of personal
finance programs in K–12 schools:
•

Classroom teachers are the
foundation of K–12 education.

Equipping classroom teachers to better teach personal
finance results in a significant
multiplier effect. In addition
to the Keys program for high
school educators, since 2002 the
Philadelphia Fed has offered
numerous other programs2 that
train teachers from all grades to
better teach personal finance and
economics. Investing in educators is essential because each
teacher trained will, on average,
reach 75 students per academic
year. This multiplier effect results in significant economies of
scale and efficiency in program
delivery. In contrast, although
personal finance programs that
rely on classroom visits from
business people and civic leaders
do provide a level of outside
knowledge and experience,
these programs often result in
less instruction time per student. And, without large cadres
of volunteers, personal finance
programs that rely on direct education usually reach far fewer
students than do programs that
rely on teachers to deliver the
content. Finally, with significant
talent for, specialized training
in, and experience with pedagogical methods, teachers have
a comparative advantage over
nonteachers in educating young
people in all academic fields.

Andrew T. Hill, Ph.D.

Economic Education Advisor and Team Leader

•

The field of K–12 personal
financial education, particularly since the financial crisis of
2007–2009, has exploded with a
myriad of curriculum resources
and programs, nearly all available free of charge to teachers
and schools. There is little need
for the development of new
personal finance curriculum resources except to fill gaps resulting from the emergence of new
financial products and issues.
Rather, the focus of K–12 personal financial education in the
U.S. increasingly should turn to
equipping teachers and schools
with proven materials. The
Keys curriculum brings together
proven, existing materials, such
as Financial Fitness for Life, Second
Edition3; Learning, Earning, and
Investing4; and Practical Money
Skills,5 to give teachers a coher-

* The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
1
For more information about the Keys to Financial Success program, visit www.philadelphiafed.org/keys or watch a short YouTube video at
www.youtube.com/watch?v=jD5Iv4x_tQU. This year, the Keys program will be held on July 6–10.
2
Some recent economic and personal finance teacher-training programs offered by the Philadelphia Fed include Making Sense of Money and Banking
I and II, High School Personal Finance, High School Economics, Entrepreneurship and You, Personal Finance for the Middle School Classroom,
Federal Reserve Financial Education Day, and World History and Economics.
3
Barbara Flowers and Sharon Laux, Financial Fitness for Life, Second Edition. New York: Council for Economic Education, 2010. See http://fffl.ncee.net/ for
more information about the Financial Fitness for Life program.

teach the Keys program. Successful K–12 personal finance
programs need to be adaptable to
different academic departments
within schools.

ent, organized curriculum for
teaching their own high school
personal finance courses at very
low cost.
•

Most K–12 teachers in the
United States have little or no
training in personal finance
content or how to teach it but
are eager to be better equipped
through in-service professional
development. Training teachers matters. In-service professional development training is
essential to ensure that first-time
personal finance teachers receive
adequate content and pedagogical preparation and that experienced personal finance teachers receive ongoing refresher
programs. During a one-week
course offered each summer, the
Keys program provides 30 hours
of professional development
to teachers before they teach
the curriculum to their students. There is also a three-hour
refresher program offered each
year after school.

•

Personal finance in K–12 schools
in the United States has no
“home.” In most states, personal
financial education is not assigned to any particular subject
area. Teachers from many different areas, including social studies,
family and consumer sciences,
business, and mathematics, are
often equally likely to be assigned
to teach personal finance in their
schools. Because the program
is so versatile, teachers from all
these areas have been trained to

•

Very few personal finance
programs are evaluated; even
fewer are evaluated well. Given
the many personal finance programs and curriculum resources
available to schools in the U.S.,
evaluation of program success
is essential so that teachers
and administrators can make
informed curriculum and program choices. To date, relatively
few studies have been published on the effectiveness of
K–12 personal finance programs
in the United States. Also, much
of that existing research has
been conducted without the use
of the best research methods.6
Asarta, Hill, and Meszaros
reported the findings of a recent
study into the effectiveness of
the Keys program.7 They found
that high school students who
took a one-semester Keys to Financial Success personal finance
course from a trained teacher
increased their knowledge of
personal finance concepts, as
measured by pre- and posttests,
by more than 60 percent.

•

Many K–12 personal finance
programs are likely too brief to
make a difference. While most
schools offer at least some personal financial education to their
students, few offer complete
high school courses like the Keys

to Financial Success program.
And the personal finance that is
being taught is often concentrated in specific grades, particularly
the high school grades, rather
than presented at each grade
level in the K–12 progression.
For this reason, in addition to the
Keys programs, the Philadelphia
Fed offers numerous professional development programs
for teachers of all grade levels.
Although these programs are not
as involved as the Keys program,
they are designed to provide
teachers with the knowledge,
skills, and curriculum materials
necessary to introduce students
to economics and personal
finance in the classroom so that
students become familiar with
financial concepts such as saving, investing, budgeting, and
decision-making well before
graduation from high school.
Some studies have shown that
personal financial education has
little or no effect on the long-run
personal finance knowledge and
capabilities of young people; this
may be because nearly all those
studies examined relatively brief
programs, such as classroom visits by business leaders, lessons or
units of instruction infused into
existing classes, or assembly programs. The study by Asarta, Hill,
and Meszaros, which focuses on
the more in-depth program, provides some evidence that longer,
stand-alone high school personal
finance courses taught by trained
teachers can have a significant
impact on student knowledge.

4
Jean Caldwell, James E. Davis, and Suzanne M. Gallagher, Learning, Earning, and Investing. New York: Council for Economic Education, 2004. See
http://lei.councilforeconed.org/ for more information about the Learning, Earning, and Investing program.
5
VISA, Practical Money Skills. San Francisco: VISA, U.S.A., Inc., 2000. See www.practicalmoneyskills.com/ for more information about the VISA
Practical Money Skills program.
6
See Carlos Asarta, Andrew Hill, and Bonnie Meszaros, “The Features and Effectiveness of the Keys to Financial Success Curriculum,” International
Review of Economics Education, 16:A (May 2014), pp. 6–24 for a discussion of research methods for evaluating program effectiveness.
7
See Asarta, Hill, and Meszaros, May 2014.

FINANCIAL EDUCATION AND LITERACY

SPOTLIGHT ON RESEARCH
By Marvin M. Smith, Senior Community Development Economic Advisor

The Influence of Financial Literacy
on High-Cost Borrowing*
Two topics have gained widespread
attention in recent years. One is the
rapid growth of high-cost borrowing
offered by the alternative financial services (AFS) industry, such as payday
loans, pawn shops, auto title loans,
refund anticipation loans, and rent-toown stores. The other topic is the efficacy of financial literacy on improving the overall financial well-being of
individuals. A study by Annamaria
Lusardi and Carlo de Bassa Scheresberg explores the characteristics of
those who use high-cost borrowing
and the influence of financial literacy
on their borrowing behavior.1 The following is a summary of their paper.

and pawnbrokers — which also
tend to charge high interest rates —
earned $7 billion and $4 billion in
revenue, respectively.”

Background
The authors noted the growth of the
AFS industry by citing a 2009 report
from the Federal Deposit Insurance
Corporation that “estimated this
industry to be worth at least $320 billion in transactional services.” Other
research has further delineated the
impact of AFS. One study pointed
out that in 2007 alone, “Americans
paid an estimated $8 billion in
financial charges to borrow $50 billion from payday lenders at annual
percentage rates often well over 400
percent.” Another study reported
that in 2008 “rent-to-own businesses

Although there is a growing body
of literature that is concerned with
the influence of financial literacy on
financial behavior, the authors take a
slightly different perspective. “While
many papers have focused on the asset side of household balance sheets,
examining, for example, the effects of
financial literacy on retirement savings or investment in stocks, [their]
paper shows we also need to look at
the liability side of the balance sheet,
examining borrowing behavior and
debt management.” According to the
authors, “skills and knowledge in
dealing with debt can play an impor-

Who uses AFS? The authors indicated that AFS use is widespread;
however, people between the ages of
18 and 34 are heavy users. Moreover,
while a high proportion of individuals with low incomes are AFS users,
there is a considerable fraction of
higher-income persons who use AFS
as well. It stands to reason that any
financial decision-making is predicated on the decision-maker’s basic
knowledge of financial concepts.

tant role in explaining how individuals manage their balance sheets.”
Data and Methodology
For their analysis, Lusardi and de
Bassa Scheresberg used the 2009
National Financial Capability Study
(NFCS), which consists of three
linked surveys: the National Survey,
which is a phone survey of 1,488
American adults; the State-by-State
Survey, an online survey of approximately 28,000 American adults
(about 500 per state, plus the District
of Columbia); and the Military Survey, an online survey of 800 military
service members and spouses.
The NFCS has several desirable
features. It contains information on
how people manage their resources
and make financial decisions. Of
particular importance to Lusardi
and de Bassa Scheresberg, the
NFCS has information not only
on assets and asset-building but
also on debt, including the use of
high-cost borrowing. The NFCS
also includes three questions that
measure financial knowledge.2 The

* The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
1
Annamaria Lusardi and Carlo de Bassa Scheresberg, “Financial Literacy and High-Cost Borrowing in the United States,” National Bureau of Economic
Research Working Paper 18969 (2013).
2
These questions can be found at http://ow.ly/KdhX7.

authors indicated that a correct answer to all three questions indicates
financial literacy.
To conduct their analysis, the authors chose a sample of 26,364 observations. Their analysis is predicated
on the traditional intertemporal
model of consumption and savings,
which “predicts that individuals will
borrow to smooth consumption” if
they have no savings and are hit by
an unexpected shock. In addition to
unexpected shocks to resources, individuals who are prone to impatience
might be willing to borrow at high
interest rates. Also, if individuals are
unable to borrow from traditional
financial sources, such as banks, they
might resort to using AFS.
The authors carried out their analysis
in two phases. First, they used the
NFCS sample to provide some characteristics of AFS users, and then they estimated the impact of financial literacy
on the use of high-cost borrowing.
Results
Using their NFCS sample, the authors found that the highest percentage of AFS users among different
demographic groups are as follows:
25 to 34 years of age; less than a
high school education; separated or
single; non-Caucasian; income of less
than $25,000; and unbanked.
Next, Lusardi and de Bassa Scheresberg used a series of regressions to
investigate the influence of financial
literacy on high-cost borrowing.
For this segment of the analysis,
the authors modified the sample
to exclude those respondents who
were over age 65, since they were
more likely to be dissaving than
borrowing. In all the regressions,
the dependent variable denoted that

the respondent used at least one of
the high-cost borrowing products
(payday loan, auto title loan, refund
anticipation loan, pawn shop, or
rent-to-own shop). In the first regression, the authors used only one
explanatory variable, namely, that
the respondent answered all three
financial literacy questions correctly.
The result showed that those who
are more financially literate “are 15
percentage points less likely to have
engaged in high-cost borrowing.”
The authors recognized that financial literacy is not the only influence
on high-cost borrowing. Therefore, they added the previously
mentioned demographic characteristics associated with high-cost
borrowing. Thus, in their second
regression, in addition to financial
literacy, they added the following as
explanatory variables: age, gender, race/ethnicity, marital status,
number of children, employment
status, and income. After accounting
for the effects of these demographic
characteristics on high-cost borrowing, they found that financial
literacy still had an important impact; namely, “those who are more
financially literate are about 8 percentage points less likely to engage
in high-cost borrowing.”
In their third regression, the authors
included some variables that represented various levels of educational
attainment (high school, some college, college, or postgraduate). The
education variables showed that
those with higher levels of educational attainment were less likely to
make use of high-cost borrowing.
However, they found that financial
literacy still had “predictive power
above and beyond the effect of
education.” Thus, they pointed out

that high-cost borrowing is not only
affected by general knowledge but
also by specific knowledge of math
and finance.
The authors included additional
variables in their fourth regression
that reflected preferences toward
risk, economic shocks, and measures
of financial fragility (e.g., having
“rainy day” savings, possessing
health insurance, and owning a
home). Even after controlling for
these influences, Lusardi and de
Bassa Scheresberg found that financial literacy was still statistically
significant and important.
In their last regression, the authors
added a variable indicating whether
the respondent was unbanked. Once
again, even after taking into account
bank status, the authors found that
“those who are financially literate
are still less likely to rely on highcost methods of borrowing.”
Policy Implications
The findings of Lusardi and de Bassa
Scheresberg indicated that “it is
not only the shocks inflicted by the
financial crisis, the structure of the
financial system, and the availability
and cost of using banks that matter,
but that the level of financial literacy
also plays a role in explaining why
so many individuals have made use
of high-cost borrowing methods.”
The authors noted that their results
suggest a method to intervene in
high-cost borrowing. According to
them, “one way in which we may
affect AFS use is through promoting
financial literacy and financial education.” Moreover, “such educationrelated intervention may affect not
just wages but also net worth and,
in particular, the costs incurred in
managing debt.”

FINANCIAL EDUCATION AND LITERACY

Clarifi Offers Financial Services at Health
Centers, Adds Coaching and Mentoring*
By Keith L. Rolland, Community Development Advisor
Clarifi, a nonprofit that provides
credit and budgeting counseling at
24 offices throughout the Delaware
Valley, is trying a new approach in
the delivery of its services by making
them available in health-care centers
in order to reach people where they
regularly go for services.
At the same time, Clarifi is expanding
its use of personal financial coaching
and mentoring for women in its FinanciallyHers program, which starts
with a “boot camp.” It is adding these
services as a way to provide women
with services over the long term on
different financial needs.

Clarifi, a nonprofit that
provides credit and
budgeting counseling
at 24 offices throughout
the Delaware Valley, is
trying a new approach
in the delivery of its
services by making
them available in
health-care centers in
order to reach people
where they regularly
go for services.

In addition, in response to the issue
of rising student loan debt, Clarifi is
developing a program to offer financial counseling to college students.
Medical–Financial Partnership (MFP)
Clarifi, an affiliate of the Public
Health Management Corporation
(PHMC), is joining with the PHMC
in a medical–financial partnership
(MFP). The goal of the MFP is to integrate financial counseling in community-based health-care organizations
that provide a range of physical and
mental health, legal, case management, and other services to residents
of low-income communities.
Patricia A. Hasson, president of
Clarifi, said, “This is an innovative way to think about providing
services. We’re looking to embed our
services with health centers that have
an established ongoing relationship
with clients. The model is efficient
and practical by allowing us to serve
clients in one community location for
two unique services. However, the
main reason for the MFP is that we
want to learn how individuals’ financial health can impact their physical
health and vice versa. Integrating
services and working with the clients
will allow us to collect more data on
this subject.”
Indeed, a 2009 study that included
Clarifi clients found that poor
health may be an important factor
behind foreclosure.1 Nearly 25 per-

cent of the study participants had
high medical bills and owed money
to medical creditors.
Through the MFP, Clarifi is now
offering its services at a PHMC
health center in North Philadelphia. Nurses and other primary
care providers at the center screen
patients on their financial as well as
health needs.
This initiative recognizes that there
may be a connection between financial difficulties and health problems.
For example, a patient who has high
blood pressure may disclose that
he or she is greatly worried about
financial matters. Or a patient who
needs expensive medication for a
health condition may struggle with
how to pay for it.
Through the screening process,
patients who want financial counseling are referred to a Clarifi financial
counselor who is onsite several days
a week. The counselor will work
with patients on strategies to manage spending, decrease debt, and
increase savings and asset-building.
Pilot goals for 2015 call for the counselor to provide one-on-one counseling to approximately 150 individuals
and for Clarifi to conduct educational workshops for up to 200 residents.
FinanciallyHers
Since its inception in 2008, FinanciallyHers has helped more than

* The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
1
See Craig E. Pollack and Julia Lynch, “Health Status of People Undergoing Foreclosure in the Philadelphia Region,” American Journal of Public Health,
99 (October 2009), pp. 1,833–1,839, available at www.ncbi.nlm.nih.gov/pmc/articles/PMC2741520/.

Photo Credit: Mark Gavin

that “the women in FinanciallyHers
may want Clarifi’s assistance in the
future, for example, to buy a house
or reduce debt.”
Morris-Louis also shared the following observations: “We learned we
had to be systematic in the coaching program and began to give
prospective coaches and clients the
Myers–Briggs personality inventory
to find matches that would jell. Our
staff now monitors how coaches and
clients are doing through in-person
inquiries and surveys. An AmeriCorps VISTA volunteer helps manage the program.”2
Clarifi’s coaching program builds on the one-on-one budgeting and credit counseling that
Clarifi has provided for many years.

2,500 women to budget, save, and
meet financial goals. Meeting initially in a group, the women explore
factors that influence their money
decisions, including spending “triggers.” They attend workshops on
such subjects as how to run their
household like a business, how to
attain good credit, and how to raise
money-savvy children.
In 2014, Clarifi began inviting
participants in its FinanciallyHers
program to work one-on-one with
financial coaches on goals such as
paying off debt or saving for retirement. Participants agree to meet in
person with a coach initially and
then to meet or talk by phone with
the coach over the next four to six
months. In 2014, Clarifi paired 68
clients and coaches who are expected
to meet monthly. In February 2015,
Clarifi paired another 27 sets of
coaches and clients.
Clarifi recruits volunteers from
other nonprofits, banks, and even

its own staff and guides them by using a financial coaching curriculum
developed by Central New Mexico
Community College. Coaches attend
a four-hour training session before
they start to work with participants.
Markita Morris-Louis, senior vice
president of community affairs and
general counsel of Clarifi, explained,
“Coaches try to motivate people to
achieve goals through self-directed
behavior change. Coaches monitor
client progress and offer resources
and encouragement.” The coaches
are volunteers, whereas Clarifi
counselors are certified in credit and
budget counseling and/or housing
counseling by the National Foundation for Credit Counseling, the U.S.
Department of Housing and Urban
Development, and state agencies.
Hasson said, “Using volunteers in
our coaching program is an economical way to connect with people over
a long time to help clients achieve
financial goals.” Morris-Louis noted

Clarifi is also partnering with the
Forum of Executive Women, which
has more than 425 members in the
Delaware Valley, for a special event
in May 2015 that will make mentoring available to FinanciallyHers
clients. Participants will have four
15-minute speed sessions with female executives from the Forum on
subjects such as career development,
communications, and networking.
Student Counseling
Clarifi has also developed a program in response to high levels
of student debt. In the initiative,
Clarifi is providing “financial aid
check-ups” for Montgomery County Community College students to
counsel them before they become
delinquent or default on student
loans. Clarifi is talking to other
community colleges about helping
students fully review their financial
portfolio while making decisions
about financing their education.
For more information, contact Markita
Morris-Louis at 267-546-0243 or mlouis@
clarifi.org, or visit www.clarifi.org.

Useful resources on financial coaching are available at http://ow.ly/Kvg6I.

FINANCIAL EDUCATION AND LITERACY

Lessons from the Jim Casey Youth Opportunities Initiative
...continued from page 1

tion to adulthood and receive financial and emotional support from
their parents well past age 18, but
young people aging out of foster care
face a very different situation: “Too
old for the child welfare system, but
often not yet ready to live as independent young adults, the approximately 24,000 foster youth who ‘age
out’ of care each year are expected to
make it on their own long before the
vast majority of their peers.”5,6
One report in the Midwest Study
compared a sample of young adults
who aged out of foster care at age
21 and a nationally representative
sample. Nearly 25 percent of the
young adults aging out of foster
care lacked a high school diploma
or GED certificate by age 21, compared with 11 percent of their peers.
Median earnings among those who
had been employed were just $5,450,
compared with $9,120 among their
peers. More than half of the young
women and nearly one-third of the
young men had at least one child.
More than half had been homeless
at least once. Young adults aging out
of foster care also had a high level of
recent involvement with the criminal
justice system.
Another report in the Midwest Study
stated that more than one-third of
young people aging out of foster
care expressed a general need for
training in independent living skills.
The report states, “Those who cited
specific independent living skills in
which they needed training were

most likely to mention budgeting
and money management.”7

•

Opportunity Passport
Gary J. Stangler, who is currently
executive director of the Jim Casey
Youth Opportunities Initiative, said,
“When we started developing Opportunity Passport over a decade
ago, the impetus came from the
observation that most young people
aging out of foster care had little or
no money, and if they were in a state
that provided some cash assistance,
they had no ability to manage it.”
Lynn Tiede, presently the initiative’s
senior associate director for policy,
added that young people aging out
of foster care typically don’t have
experience in managing money from
an allowance or part-time job and
that the initiative wanted to help
them practice managing money,
setting financial goals, and building
assets in critical areas such as postsecondary education and housing.
Opportunity Passport, which targets
young people between the ages of
14 and 25 who were placed in foster
care on or after their 14th birthday,
has three main parts:
•

Financial education classes that
initially focus on asset-building,
credit, and money management
and then later explore financial needs related to education,
housing, and transportation,
as well as savings and investments, are offered.8

•

An IDA in which young people
can withdraw savings to purchase an allowable asset and
have it matched dollar for dollar
up to $1,000 per year is available.
Allowable assets are generally
for education expenses such as
tuition, books, and computers;
housing costs, such as apartment
security deposits; cars; microenterprises; and health-care expenses. Asset purchases must be approved by the initiative affiliate
with a maximum lifetime match
of at least $3,000. The affiliate
opens the IDA at a local bank or
credit union after the participants
attend the initial classes.
Adult support from the affiliate
and sometimes the community is
offered to help participants make
financial decisions and learn
from their mistakes.

Young participants build savings
with stipends received for attending
financial education events, completing biannual surveys, and participating on youth advisory boards. The
program has evolved flexibly and
varies somewhat by local site.
There have been 7,393 participants
in Opportunity Passport from its
inception in 2001 to April 30, 2014,
according to Sandy Wilkie, director
of research and evaluation. Of the
7,393 participants, some 35 percent
have made a total of 5,590 asset
purchases. There are currently 2,400
participants; 48 percent have been
homeless and 22 percent are parents.

See a report of the Midwest Study at http://ow.ly/L5ni5.
U.S. Department of Health and Human Services, The AFCARS Report: Preliminary Estimates for FY 2005 as of September 2006. Administration for Children
and Families, Administration on Children, Youth and Families, Children’s Bureau, 2006, available at http://ow.ly/L5q2g.
7
See the report at http://ow.ly/L5nJm.
8
The curriculum for Opportunity Passport classes is available at www.jimcaseyyouth.org/keys-your-financial-future.
5
6

•

Opportunity Passport Asset Purchases as of April 2014
Based on 5,590 asset purchases by 2,623 out of 7,393 participants (35%)
1,172; 21%

1,283; 23%

581; 10%

207; 4%
73; 1%

Education
Housing
Investment
Medical Expenses
Microenterprise
Vehicle
Credit Building
Participant-Speciﬁc
Requests

174; 3%
65; 1%
2,035; 37%

Vehicle purchases are the most common purchases in the IDA program
and allow participants to travel to
work, attend school, and engage in
community activities. Of all purchases,
37 percent have been for vehicles, 23
percent for educational expenses, 21
percent for housing, and 10 percent for
investments. The balance of purchases
has been made for medical expenses,
microenterprises, credit building, and
participant-specific requests.
Lessons Learned
Researchers who interviewed 38 Opportunity Passport participants and
eight initiative staff members said in
a 2012 evaluation9 that young people
making the transition from foster care
“have a very small margin of error for
managing their financial lives successfully, and as participants in the Opportunity Passport, they receive some
support that helps them face financial
challenges. With small and erratic in-

comes, spending and saving decisions
were often difficult to manage; shortages meant that even small decisions
had significant consequences.”10
The evaluation was coauthored by
Clark Peters, assistant professor of
social work at the University of Missouri. Peters explained in an interview, “There’s a lack of stability with
many foster youth. It’s hard to save
when you don’t know where you’re
going to live. The learning curve is
steeper and the stakes are higher.”
Initiative staff, in an issue brief published in October 2014, wrote that:
11

•

The single most important
ingredient to financial success
for young people appears to be
“having at least one reliable and
informed adult in their life to
help them navigate decisions that
have financial implications.”12

•

Many young people aging out of
foster care have a “critical” need
for credit repair because they
have been victims of identity theft
by relatives or other adults or
have made mistakes on their own.
Young people need a good credit
score to rent an apartment, enter
into a cell phone or utility contract, and find employment, and
in 2013 the initiative added good
credit as an Opportunity Passport
asset category for which matches
can be made. Initiative affiliates
try to work with nonprofits that
offer loans for apartment security
deposits or utility payments and
that report payback of the loans to
credit bureaus.
Financial skills cannot be learned
solely in a classroom, and young
people must “practice their skills.”
Child welfare systems should
promote financial capability as
an outcome for all young people
they serve.

Initiative staff said that Opportunity
Passport’s experience is instructive for
those working with other vulnerable
youth populations, such as young
people living in poverty.
Savings Challenges
The researchers highlighted the difficulties the young participants faced in
saving money and wrote: “Overall, the
young people’s harsh financial circumstances, lack of financial knowledge,
and lack of support — along with
youthful financial missteps and poor
decision making — made it difficult
to accumulate savings in Opportunity
Passport accounts.”13 Many young peo-

The report, Enduring Assets: A Study on the Financial Lives of Young People Transitioning from Foster Care by Clark Peters, Margaret Sherraden, and Ann
Marie Kuchinski, and a summary of the report are available at http://ow.ly/L5xXJ.
10
See Enduring Assets, 2012.
11
Jim Casey Youth Opportunities Initiative, Building Financial Capability for Youth Transitioning from Foster Care, 2014, available at http://ow.ly/L5kWb.
12
See Jim Casey Youth Opportunities Initiative, 2014. In addition, see a report by the Annie E. Casey Foundation that recommends a “two-generation
approach” to simultaneously help low-income children and their parents escape poverty. This report is available at http://ow.ly/L5laQ.
13
See Enduring Assets, 2012.
9

FINANCIAL EDUCATION AND LITERACY

Lessons

...continued from page 15

ple struggled to retain a surplus for savings and found
it difficult to resist spending money at their disposal.
The researchers said that the two largest obstacles to
saving appeared to be a lack of predictable income
streams and a lack of simple ways to get savings into
an account, such as an automatic saving mechanism.
Another factor identified in the initiative’s issue
brief is that Opportunity Passport participants often
expressed concern that money does not feel like their
own when it is in a traditional IDA because withdrawals other than for a match are severely limited
or not allowed.
Role of Financial Institutions
The researchers found that most Opportunity Passport
participants relied heavily on cash for transactions,
partly because the participants didn’t trust traditional
financial institutions because of negative experiences
or reports from peers. Virtually all the young people
surveyed used alternative financial services, such as
check-cashing outlets, short-term loan centers, and
rent-to-own stores. In the absence of viable products in
mainstream institutions, Opportunity Passport participants turned to check-cashing services and prepaid
card services that appeared to make spending easier
and saving more difficult.
A continuing challenge for initiative affiliates, as
reported in the issue brief, is finding banks and credit
unions that have flexible savings accounts and IDAs
and that are committed to creating a supportive environment for young people.
Stangler, who is a former director of social services for
the Missouri Department of Social Services, concluded
in an interview, “We have to prepare youths leaving the
foster care system to live in the same financial world
that we all do. We need to build their financial capacity
to manage money and to save for the things that many
young people need, such as an apartment or house and a
car to get to work and school. And they need good credit
in a credit score–driven world.”
For more information, contact Beadsie Woo at bwoo@aecf.
org or visit www.aecf.org/.
16

Perspective on Foster
Care Trends*
Fred Wulczyn, Ph.D., Senior Research Fellow in Chapin Hall at
the University of Chicago, was asked to provide his thoughts on
the decline in the foster care population as shown in Mapping
Our Community. His comments are as follows:
Tip (Thomas P.) O’Neill Jr., former Speaker of the House
and Massachusetts congressman who served his home
state for 34 years, famously said that all politics are local.
Had he been a child welfare director, he might have also
concluded that all child welfare systems are local. It is true
that, as a nation, we have watched the foster care population fall from its historical high point of 567,000 children
in 1999 to just fewer than 400,000 in 2012. That said, it is
very difficult to paint the nation’s child welfare system
with a single broad brush. First, there is a small but significant group of states in which the foster care population
has been growing. Second, the decline is concentrated in
a handful of urban centers (e.g., New York City, Chicago,
Los Angeles, and Philadelphia). In some rural areas, even
in states with shrinking populations, the number of children living in foster care has continued to grow.
To understand what is going on locally, it is important
to isolate how many children enter and leave foster care
each year. Admission rates vary significantly between and
within states. In some states, half the placed children leave
within seven months; in other states, it takes well over 18
months. For example, in states such as Arizona and Oklahoma, the number of children entering foster care in recent years has been climbing along with the length of time
on average each child spends in foster care. Elsewhere,
in states such as Maryland, entries into and time spent in
foster care have been declining. In Illinois, admissions are
down, but length of stay has changed hardly at all.
Fewer children nationwide living away from their families is reason to celebrate. Nonetheless, there is no simple
narrative that adequately summarizes the diverse experience of states. Child welfare systems are local; persistent
progress requires a deep understanding of local policy,
local practice, and local context.
For information, contact Fred Wulczyn at fwulczyn@chapinhall.org.
* The views expressed here do not necessarily represent the views of
the Federal Reserve Bank of Philadelphia or the Federal Reserve System.

Foster Care Population in the United States*

MAPPING OUR

At the end of the 2013 federal fiscal year, there were roughly 400,000 children
in foster care in the United States. To put this figure in context, this represented
roughly 4.6 children in foster care for every 1,000 individuals in the U.S. age
20 or younger. As the map indicates, this ratio varied widely from state to state,
with a low of 1.9 in Virginia and a high of 9.5 in neighboring West Virginia.1

COMMUNITY

Nationwide between fiscal years 2004 and 2013, the foster care population
fell by more than 20 percent. Thirty-six states and the District of Columbia
registered declines over this period, while 14 states reported an increase.
The foster care population fell in all three Third District states: to 14,300 in
Pennsylvania (-35 percent); to 6,900 in New Jersey (-43 percent); and to
700 in Delaware (-17 percent).

Third Federal Reserve District
Third Federal Reserve District
KEITH WARDRIP, COMMUNITY DEVELOPMENT RESEARCH MANAGER

Keith Wardrip
Community Development Research Manager

Number of Children in Foster Care for
Every 1,000 Residents 20 Years and Younger
Under 3.0
3.0 to 4.9

5.0 to 6.9
MT

7.0 and over
MN

ID
WI

MA
CT

NJ
OH

NV
UT

KY
NC
TN

OK
AR

State-Level Percent Change in
Foster Care Population (FY2004–FY2013)
75%
50%
25%
0%

-25%
-50%
-75%

* The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
1
Annual figures reflect the number of children in foster care on September 30. Ratios for Alaska and Hawaii, which are not depicted cartographically,
were 8.8 and 3.0, respectively.
Sources: Author’s calculations using Adoption and Foster Care Analysis and Reporting System (AFCARS) data produced by the Children’s Bureau,
Administration for Children & Families, U.S. Department of Health and Human Services; U.S. Census Bureau, 2013 American Community Survey,
Table B01001; ESRI, derived from Tele Atlas

FINANCIAL EDUCATION AND LITERACY

Rhode Island Nonprofit Launches Financial
Coaching to Increase Asset Matches*
By Keith L. Rolland, Community Development Advisor
Foster Forward, a Rhode Island
nonprofit, is one of several affiliates
in the Jim Casey Youth Opportunities Initiative’s Opportunity Passport program that provide personal
financial coaching to young people
leaving the foster care system.
An initiative affiliate since 2005, Foster Forward has worked with more
than 750 young people, including
280 who have accumulated savings
and made asset purchases totaling
more than $900,000. Participants
have opened individual development accounts (IDAs) or, more typically, traditional savings accounts
that are used as IDAs with Citizens
Bank, Bank of America, and other
banks and credit unions.1 Foster
Forward has received awards from
Citizens Bank and Bank of America
for its overall work.
Lisa Guillette, executive director of
Foster Forward, cited two Opportunity Passport success stories:
•

Chris entered the child welfare
system at age nine and “aged
out” at 18. At 16, he began using
matching funds and his own
money to invest in bank CDs and
later used two matches to take
out secured loans, paying them
back as a way to build his credit
score. He currently runs his own
business and attends the Community College of Rhode Island.

•

Jonathan works in a warehouse,
drives a school bus, and attends
college. He worked with a Bank
of America volunteer financial
coach who helped him obtain
his credit report and score and
helped him correct inaccuracies
as well as determine his goals.
Jonathan has raised his credit
score and received two asset
matches: one for an apartment
security deposit and another for
a deposit on a car.

Financial Coaching
Guillette explained that Foster Forward started using financial coaches to
better understand why some eligible
participants hadn’t pursued asset
matches and to increase youth participation in such match programs. The
nonprofit also believed that the coaches could help participants decrease
debt, increase savings, and improve
their credit scores, she said.
As an incentive to increase asset
matches, the nonprofit offered financial coaching participants a two-toone asset match, or two one-to-one
matches, for apartment deposits,
vehicle purchases, medical bills, and
credit-building purposes.
Foster Forward is trying two different financial coaching approaches.
In both, volunteers and participants
meet four times during a two-month
period to discuss budgeting, debt,

Chris Burns, now 20, said the financial
advice and matches he received through
Foster Forward were the first steps toward
his financial stability.

banking, credit, saving, and health
issues. They also meet for an additional nine to 14 hours during the
year. Details of the two approaches
are as follows:
•

•

Since May 2014, 12 college-student volunteers have been working with about 30 participants
after receiving formal financial
coaching training from the Capital
Good Fund (CGF), a community
development financial institution
based in Providence, RI.2
Since June 2014, 24 Bank of
America volunteers have been
working one-on-one with 24 participants after receiving informal

training, which included the Opportunity Passport curriculum.
As of the end of December 1, 2014,
asset matches were made by six
CGF participants and three Bank of
America participants.
There are several differences in
the two approaches. Foster Forward paid CGF for administrative
expenses related to the coaching
program but didn’t make a similar
payment to Bank of America. The
CGF participants hadn’t previously
made an asset match, whereas the
Bank of America participants had
made at least one asset match. Also,
CGF sometimes makes loans to help
its participants build or repair credit
and also reports the loan payments
to credit agencies.
Guillette shared these preliminary
observations on the nonprofit’s
experience with financial coaching:
“Many of our volunteers from Bank
of America are becoming trusted
mentors and life coaches, and that is
an important type of asset building
we refer to as social capital. These
volunteers have helped participants
build life skills beyond financial
capability. We are raising awareness
among the volunteers regarding this
population and the challenges they
face and engaging them as adult
supporters and allies in our work.”

Tuesday, May 19, 2015, 9:00 a.m. to 4:00 p.m.
Cork Factory Hotel, Lancaster, PA
The conference will explore equitable economic development
that affords all individuals and communities the opportunity to
realize the benefits of economic growth. Speakers will examine
how economic development planning and decision-making can
include equitable goals.
The conference is organized jointly by the Federal Reserve Bank
of Philadelphia’s Community Development Studies and Education (CDS&E) Department and Community First Fund, a community development financial institution (CDFI) that is based in
Lancaster, PA, and that serves a 13-county region of central and
eastern Pennsylvania.
The conference’s primary audience includes executive directors of community and economic development and planning
departments, community and economic development corporations, workforce investment boards, CDFIs, and nonprofits
engaged in workforce development and small business development; affordable housing and commercial developers;
bank Community Reinvestment Act officers; local government
representatives; and equity advocates.
For information on registration, contact Jeri Cohen-Bauman
of CDS&E at 215-574-6458 or jeri.cohen-bauman@phil.frb.
org. For information on the conference, contact Noelle Baldini
of CDS&E at 215-574-3722 or noelle.baldini@phil.frb.org, or
Lydia Walker of Community First Fund at 717-393-2351, ext.
117 or lwalker@commfirstfund.org.
Visit http://www.philadelphiafed.org/EEDC to view the conference agenda and register for the event. The deadline for
registration is May 8, 2015.

For more information, contact Lisa
Guillette at 401-438-3900 or lisa.
guillette@fosterforward.net or visit
www.fosterforward.net.

FINANCIAL EDUCATION AND LITERACY
CASCADE
Federal Reserve Bank of Philadelphia
100 North 6th Street
Philadelphia, PA 19106-1574

PRESORTED STANDARD
U.S. POSTAGE PAID
Philadelphia, PA
PERMIT No. 529

ADDRESS SERVICE REQUESTED

Full text of Cascade (Federal Reserve Bank of Philadelphia) : Cascade, No. 87

FRASER