Association for Public Policy Analysis & Management

When considering the economic strain experienced by low-income households across the country, it has become evident that the ability to make sound financial decisions is more important than ever for maintaining household stability. Poor financial decisions can have significant long-term consequences for individuals and families. And individuals are not fully in control of their financial outcomes—structural and marketplace factors certainly also play a role. Therefore, helping consumers make healthy financial decisions is critical. There is, however, little formal evidence demonstrating which strategies are most effective. And while there is perceived value in financial education broadly,  the paucity of empirical support means that the field has not been able to draw solid conclusions about what actually works.

Our evaluation, the first rigorous experimental study of the impacts of one important strategy, financial coaching, helps fill this gap. Financial coaching is a strategy that has undergone an exceptional expansion into existing and new financial service providers across the country over the past decade, and has, in many ways, become, a “go to” strategy for financial empowerment, emerging as a competitor to traditional financial education. Coaching shares some elements with counseling, but differs by focusing on improving financial behavior and attaining financial goals over the long term, rather than focusing on how to resolve a specific triggering event or crisis.

We engaged in a rigorous quantitative and process evaluation of two programs that offer financial coaching: the Financial Clinic (New York City) and Branches (Miami). Our evaluation tested whether the programs: improved the household balance sheet; reduced financial stress; improved financial behaviors; helped participants achieve their financial goals; or increased financial knowledge.

The study used separate randomized control trial approaches for both programs. The two programs enrolled and treated clients from January 2013 through March 2014. Baseline data are from a survey (at study enrollment) and individual-level credit bureau records (December 2012). Outcome information is drawn from both a follow-up survey (fall 2014) and credit-bureau records (October 2014). For the process study, we completed interviews with clients, coaches, and supervisors, and also observed sessions.

Results indicate that coaching produces a number of significant effects on a variety of outcomes related to money management, paying down debt, saving, credit, and perceptions of financial well-being. Most notably, participants offered access to coaching at one site had a total debt of $10,644 less, on average, than they would have in the absence of treatment. At the other site, participants’ savings were $1,187 greater than they otherwise would have been, and they also had credit scores of 21 points on average greater than what they would have been in the absence of treatment. The implications of this study’s results are considerable for the broad set of practitioners who have or are considering adopting coaching techniques into their work; for policy makers who have already made sizable investments in coaching, and are considering expansions; and for the research community engaged in understanding how to best help low-income households achieve financial health.