Financial Coaching: Helping Families Realize Their Goals and Achieve Stability

Finan­cial coun­sel­ing. Finan­cial edu­ca­tion. Finan­cial lit­er­a­cy. Finan­cial coach­ing. These terms are often used inter­change­ably to describe ways that peo­ple learn to man­age their mon­ey, from devel­op­ing a bud­get to sav­ing for a big-tick­et item such as a car or house.

But the real­i­ty is that they aren’t all the same. For near­ly a decade, the Foun­da­tion has invest­ed specif­i­cal­ly in the field of finan­cial coach­ing. Why? Because finan­cial edu­ca­tion and coun­sel­ing are not enough to help fam­i­lies achieve sta­bil­i­ty. But finan­cial coach­ing — which applies prin­ci­ples from pos­i­tive psy­chol­o­gy to man­ag­ing one’s finan­cial life, build­ing on people’s innate strengths to help them devel­op their own solu­tions — is show­ing promis­ing suc­cess in help­ing peo­ple improve their finan­cial well-being.

Set­ting goals — whether the goal relates to edu­ca­tion, career or fam­i­ly — is essen­tial to achiev­ing finan­cial sta­bil­i­ty. Between set­ting a goal and achiev­ing it, how­ev­er, peo­ple need a plan, moti­va­tion and sup­port. That’s where finan­cial edu­ca­tion and coun­sel­ing fall short. Fam­i­lies strug­gle not because they don’t know what to do or how to do it but because they need help to change their finan­cial behav­iors to meet their goals.

In finan­cial coach­ing, indi­vid­u­als and fam­i­lies iden­ti­fy their own goals and then work with a coach who helps them turn their aspi­ra­tions into real­i­ty. A key assump­tion in finan­cial coach­ing is that peo­ple are cre­ative and resource­ful but may need assis­tance in tap­ping into those pos­i­tive attributes.

How Finan­cial Coach­ing Works

Finan­cial coach­es work with clients to zero in on behav­iors to improve, dri­ven by their goals, and hold them account­able for devel­op­ing con­crete steps to change those behav­iors. Using var­i­ous tech­niques, they help indi­vid­u­als and fam­i­lies build their capac­i­ty to man­age their own finances and sus­tain finan­cial sta­bil­i­ty with­in their self-defined goals. Coach­es pro­vide reg­u­lar feed­back, sup­port and struc­ture for clients to devel­op their own solu­tions. In the long run, coach­ing helps peo­ple devel­op skills and habits so that they can nav­i­gate through sub­se­quent finan­cial sit­u­a­tions on their own.

Yet even coach­ing means dif­fer­ent things in dif­fer­ent pro­grams. There are no wide­ly agreed upon stan­dards of prac­tice or com­mon mea­sures of client out­comes. The pro­grams that offer train­ing in coach­ing tech­niques vary in qual­i­ty and intensity.

We and oth­ers in phil­an­thropy hope to help stan­dard­ize the field by build­ing part­ner­ships and net­works focused on set­ting nation­al­ly accept­ed prac­tices for coach­ing pro­grams — and encour­ag­ing finan­cial coach­es to use them. We’re already on our way: The Cen­ter for Finan­cial Secu­ri­ty has devel­oped and suc­cess­ful­ly pilot­ed the Finan­cial Capa­bil­i­ty Scale, a set of stan­dard­ized measures.

In addi­tion, we’ve sur­veyed near­ly 50 orga­ni­za­tions that offer finan­cial coach­ing to bet­ter under­stand how it’s done and iden­ti­fy core prac­tices linked to bet­ter out­comes for clients. And we are explor­ing a plat­form to mon­i­tor the take-up of finan­cial coach­ing and col­lect data and feedback.

By coa­lesc­ing around a set of mea­sures that orga­ni­za­tions can read­i­ly incor­po­rate into their exist­ing client-track­ing sys­tem, fun­ders, pol­i­cy­mak­ers and oth­er stake­hold­ers will be able to bet­ter under­stand the impact of finan­cial coach­ing in help­ing peo­ple achieve finan­cial sta­bil­i­ty. We are also look­ing into sup­port­ing a pro­fes­sion­al net­work for prac­ti­tion­ers to inter­act and exchange ideas on promis­ing prac­tices. For addi­tion­al resources and infor­ma­tion on finan­cial coach­ing, vis­it the Uni­ver­si­ty of Wisconsin-Extension’s web­site on finan­cial coach­ing strate­gies.