Young people leaving foster care need more guidance as well as financial education as they venture into adulthood, according to a new study at the University of Missouri.
Without family to serve as a support system, many teens coming out of foster care have to be far more self-sufficient than their peers and often face greater risks of homelessness and poverty.
Each year in the U.S., more than 23,000 youth age out of foster care after turning 18. The new study examines the challenges these young people must face in finding steady income and how they cope with these challenges
“Unlike young adults who learn about money from their parents, foster youth transition to adulthood without such financial experience,” said Clark Peters, assistant professor in the School of Social Work. “More importantly, they usually lack opportunities to learn from early mistakes that are so common when it comes to understanding finances.”
“Their circumstances provide little room for error as mistakes and miscalculations end up having significant negative effects, as they are often just one financial mistake away from a terrible situation.”
Participants in the study were drawn from those enrolled in Opportunity PassportTM, a matched savings program developed to help young people improve their financial capability while transitioning out of foster care. Participants in the study completed interviews on current living circumstances, employment, and household information as well as their overall financial well-being.
The findings showed that nearly all participants in the study had work experience; however, most struggled with low wages and irregular hours, making it difficult to escape poverty. Most of the participants also had little access to financial opportunities that other children often receive, such as earning allowances for doing chores or encouragement from a family member to save money. Furthermore, when these young people ran out of money, they were unable to turn to family for financial help.
The findings suggest that in order to help former foster youth succeed in their transitions to adulthood, they need support and guidance in managing money. Peters says that those working with foster children should prioritize financial matters in the services they provide.
Caseworkers need to understand the financial issues facing these young adults and be able to discuss and teach such matters before they leave foster care. In other words, these young people need opportunities to earn, spend, and save money while still in care.
“States need to provide resources for continued financial guidance to young people aging out of care,” Peters said. “Providing financial education may be helpful, but without training, without the ability to put lessons to use, financial literacy will not yield benefits later in life, when it really matters.”
Peters added that the research has led to a partnership between Missouri’s Children’s Division and the federal Consumer Financial Protection Bureau to improve how child welfare agencies emphasize financial capability among vulnerable families.
Source: University of Missouri-Columbia