How financial coaching helps people

Financial coaches can help people address concerns by assisting them in defining their own personal financial goals as well as the steps they need to take to meet their goals.

Financial coaches usually meet with clients one-on-one, and they can help consumers:

• Determine and define their financial goals.
• Develop concrete plans to meet those goals.
• Provide support over time as they work toward their goals.

The Consumer Financial Protection Bureau talked to people across the country about financial well-being and what it means to them. They said it’s:

• Feeling in control of day-to-day finances.
• Having a safety net to help stop a financial shock from turning into a long-lasting setback.
• Staying on track to meet financial goals while also being able to enjoy life. For some that means taking a vacation, for others it’s about going out to eat, and for others it could mean working less to spend more time with family.

The Urban Institute released a study the CFPB commissioned, which found that financial coaching can help increase financial well-being.

The study analyzed two different coaching programs serving low- and moderate-income consumers:

• Branches, a faith-based social services organization in Miami.
• The Financial Clinic, a New York-based nonprofit helping build the financial security of working-poor Americans.

The study found that coaches can help people achieve financial outcomes that are most relevant to their own situation. On average, people offered access to financial coaching:

• Increased savings by almost $1,200 in New York City.
• Reduced debt by more than $10,000 in Miami.
• Increased credit scores by 21 points in New York City.
• Were more likely to pay bills on time.
• Reported an increased sense of confidence in their finances and reduced feelings of financial stress.

From April 2015 to March 2019, the CFPB financial coaching initiative provided guidance to recently transitioned veterans and economically vulnerable families in places where they already go for assistance.

Comments

[Tom at Sightings]

Good advice ... a lot more people should be using financial advisers of one sort or another -- and we should probably be teaching basic finance in our schools as well.

[Rita]

Yes, a financial coach is different than a financial advisor. The coach helps with the basics and an advisor gives investment advice. You're right. Basic financial strategies should be taught in schools. It used to be taught as part of home economics, but home economics classes were discontinued in many schools. A few schools had financial management for consumers. Now some schools are offering family and consumer sciences, the new name for home economics. As a consumer and financial journalist, you can imagine how much I like that.

[Laurie Stone]

Good advice, Rita. We've used one for years and he's been a big help.

[Rita]

Good for you, Laurie. Everyone needs to pay attention to their finances to get what they want from their money.

[Carol Cassara]

I wish more people got help early. Americans do not save as much as they need to.

[Rita]

Yes, Carol, that's so true, especially since only 13 percent of Americans have pensions now. People need to start saving early for retirement. They also needs savings for a down payment for a home and college for the kids.

[Jennifer]

Understanding how to manage finances is so important. It's amazing to me how many people regularly overdraw their account, pay the NSF fees with their next paycheck, and then do it again.

[Rita]

Yes, we need basic financial education in public schools. In 2012, there were only 3.5 million students enrolled in Family and Consumer Science, the classes that have replaced home economics, secondary programs, a decrease of 38 percent over a decade.