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Moving From Plans to Progress to Help Families Thrive

How do we bridge the gap between intention and action when it comes to financial stability and growth? Emory Nelms of Duke University’s Center for Advanced Hindsight takes a close look at LISC Financial Opportunity Centers and describes the kind of interventions that increase client retention rates—thereby supporting success for people working to expand their incomes, improve their credit and raise their standards of living.

The excerpt below was published on Center for Advanced Hindsight:
Applying Behavioral Science to Improve Retention Among Financial Coaching Programs

By Emory Nelms

This April, we’re highlighting our financial stability work to celebrate National Financial Literacy Month.

Whether it’s our morning routines or how we relax, a lot of how we behave from one day to the next is out of habit and we don’t give it a lot of thought. When we are thinking about how we want to behave in the future, though, we are doing so consciously. We set our long-term goals with some degree of intentionality. We may think about what we want to achieve and why this would be beneficial for us. This process of forming the “what” and the “why” – or, our intentions – is seen as an important first step towards achieving our long-term goals.

The problem is, though, regardless of how strong our intentions are, setting goals and forming intentions does not always translate into behavior. In fact, research has consistently found an “intention-action gap.” We don’t always follow through or behave in the way we wanted to, often falling short of our goals in consequence.

We see this all the time with regards to our finances. We may want to put a little a side in case of emergency or pay more towards our debt, but for a number of reasons we fall into the “intention-action gap.” Even worse, the gap may feel especially wide if we are poor or if we have uncertain, volatile incomes that make it difficult to consistently match our expenses with our income.

Financial coaching represents a promising way to overcome the intention-action gap and help those struggling financially to find greater stability. Several recent evaluations have found that those who participate in financial coaching are more likely to engage in positive financial behaviors and they experience significant improvements to their financial circumstances in terms of employment and changes in their credit score.

The process of setting, working towards, and, ultimately, achieving personal goals is at the heart of financial coaching. While coaches offer expertise and support along the way, participants have the responsibility to set and achieve their own goals. In this way, participants’ self-determination is central to coaching and likely plays a role in driving its success: participants develop greater intrinsic motivation when they set goals themselves. However, this also means that participants must commit the time and effort in order to get the full benefits from coaching. Many do not make this commitment.

Financial coaches, then, face an important tension: they must push participants to set their own goals and help them develop intrinsic motivation while recognizing that they must first engage participants before they can really build this kind of motivation. Caught in this tension are questions around retention – what are the factors that make participants more likely to engage and commit to financial coaching early in the process? How should coaches build the relationship with participants? Are there different ways of engaging participants that might increase how many continue with the financial coaching program?

Over the past 18 months, LISC and the Common Cents Lab at the Center for Advanced Hindsight have partnered to explore just this question. Using insights from an in-depth behavioral diagnosis, we designed several potential interventions that addressed barriers faced by many coaching participants. We tested two of these interventions in 24 different Financial Opportunity Centers across 10 different cities:

  • A visual goal-setting exercise, where participants selected one of eight photographs that captured what they wanted in their financial future.
  • A postcard that participants wrote to themselves in the future to remind themselves what they wanted in their financial future.

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