Youth aging out of foster care are among the most vulnerable youth in U.S. society. There is overwhelming evidence that they struggle on practically every measure of healthy transition to adulthood. Among a host of challenges these youth report significant financial strain. While there are many avenues to address the financial circumstances of foster youth this study focuses on the concept of financial capability, an area of growing interest among state and local governments, policy advocates, and researchers.  The paper uses a longitudinal sample of youth aging out of foster care to examine the impact of services that build financial capability on economic well-being outcomes.  Data are from youth (n=829) participating in an experimental evaluation of Independent Living Services that occurred between 2001 and 2010.  The study exploits variation created by random assignment into Independent Living Services to explore the extent to which the receipt of financial capability services impacts financial stability and experiences of economic and material hardship over a three year period.  Separate analyses utilize an instrumental variables approach and a difference-in-difference analysis to estimate effects.

Results suggest increased receipt of financial capability services and supports are related to improved financial stability and reduced hardship among these vulnerable youth.  Youth that exit foster care present a great challenge to governments and social service systems.  In the absence of family, the state is responsible for preparing them to survive as independent adults.  Policies which promote the integration of financial capability services into transitional and independent living services and other programs serving foster youth may have particular merit.