In a new study from Duke University’s Center for Advanced Hindsight, behavioral science takes center stage, as researchers consider what motivates clients at LISC Financial Opportunity Centers and offer new ways to increase retention in the program so that more people have the chance to improve their financial outlook.
This April, we’re highlighting our financial stability work to celebrate National Financial Literacy Month.
The Federal Reserve recently assessed the economic well-being of the U.S. population in a 2016 report, concluding that 31% – approximately 76 million people – were either “struggling to get by” or are “just getting by” in 2015. This assessment mirrors similar research conducted by the CFPB measuring the financial well-being in U.S., which found that about a third of the population struggle to make ends meet each month or do without things they need on a regular basis.
Financial coaching represents an effective strategy to help those struggling financially to find greater stability and to improve their overall financial well-being. Whereas financial counseling or similar solutions solely address immediate financial challenges, financial coaching also encourages participants to set and achieve long-term goals. Indeed, helping participants to prioritize future goals and to chart a path to achieve them is at the heart of financial coaching and central to its success.
However, this process takes time and effort. Participants will get more out of their coaching if they are willing to commit and regularly engage with the program. Unsurprisingly, recent research looking at financial coaching has found that as participants use coaching more, the greater the benefit they receive. And yet, not all participants do fully engage with coaching. Some inevitably drop off, even in spite of the long-term benefits they would receive from sticking with the program.
In light of this, LISC partnered with CAH to explore how we might use insights from behavioral science to reduce attrition from financial coaching at Financial Opportunity Centers (FOCs). In this partnership, CAH conducted a behavioral diagnosis to better understand the challenges to retention. In 20 site visits and 33 interviews in 5 cities across the United States, CAH found coaching clients often failed to return to future coaching sessions because the benefits felt distant and intangible, the expectations for coaching were sometimes unclear and inconsistent, and the primary focus was on increasing income through employment or benefit programs rather than cash management, budgeting, or building credit. Based on our behavioral diagnosis, we recommended a series of interventions to address these identified barriers, two of which we carried forward and tested trial with 1587 clients from 24 sites in 10 different cities.
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