After foster care, young adults need money know-how

More than 23,000 young adults age out of the foster care system every year. Financial education and guidance as they learn how to earn and manage money can help.

“Unlike young adults who learn about money from their parents, foster youth transition to adulthood without such financial experience,” says Clark Peters, assistant professor of social work at the University of Missouri.

“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.”

In a new study in the Journal of Public Child Welfare, Peters examines the challenges former foster youth had earning income and how they coped with these challenges. Participants in the study came from Opportunity Passport, a matched savings program aimed at helping young people improve their financial capability when transitioning from foster care. Participants in the study completed interviews on current living circumstances, employment, and household information, as well as their overall financial well-being.

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While nearly all participants in the study had work experience, 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 receiving allowances for doing chores or encouragement from a family member to save money. When income and savings fell short, the participants were not able to turn to families for financial help.

In order to succeed in their transitions to adulthood, former foster youth need support and guidance in managing money. Caseworkers need to understand the financial issues facing young adults and be able to discuss and educate foster youth on such matters before they transition to adulthood. Further, youth in foster care need opportunities to earn, spend, and save money before they age out of the system.

“States need to provide resources for continued financial guidance to young people aging out of care,” Peters says. “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.”

Researchers from the University of Missouri-St. Louis and Georgia Regents University are coauthors of the study.

Source: University of Missouri

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Source: Futurity