Foster Care Financial Literacy Training

Financial Literacy One of the objectives of foster care should be to provide as any parent or guardian should provide, which means getting foster care youth ready for the adult world. When a youth graduates from the foster care program, ideally that youth will have all of the skills and tools needed to survive on his or her own. Reilly (2003) identified some of the issues that foster care youth face when they exit foster care.

They are generally thrown into the real world without a lot of training, but forced to fend for themselves without adult guidance. The result, Reilly notes, is a series of negative outcomes that seem commonplace to foster care youth. Among other issues, they are often unable to meet basic living expenses, and struggled to earn enough money to do so, or to obtain health care.

One of the key issues that Reilly notes is that while the youth were reporting that they had access to education on independent living issues, there was no follow-up. Without this concrete assistance, the education that they received was relatively ineffective. Thus, Reilly is indicating that education needs to be supported in some way in order to be more effective.

This is reasonable -- many former foster care youth enter the workforce at a young age, and have low-wage jobs that make it difficult for even a highly-disciplined individual to balance their bank accounts, let alone an 18-year-old who has just left foster care. Cook (1994) argues that this is often not the case. Foster care youth tend to perform roughly in line with youth who grew up below poverty level, which is to say that they perform more poorly on measures of adult success than the general population.

Cook's study showed that independent living skills training was in particular lacking. Foster care youth are far more likely than other youth to live independently during the 18-24 years, but are typically ill-equipped to do so. Cook interviewed foster care graduates in order to determine how smoothly they had transitioned to living independently. What she found was that they struggled with respect to key social outcomes such as education completion, young parenthood, and the use of public assistance.

On a positive note, Cook found that recently changes to the legal environment (at that time) had encouraged more training in the areas of money management, credit and consumer education. This enhanced training in these target areas appeared to at least give the survey respondents more confidence in these areas, even if they were otherwise struggling to make progress up the socioeconomic ladder. Courtney and Heuring (2005) has also discussed the transition from foster care to adulthood, and the challenges that these former foster care youth face.

Noting that these are basically society's children, the authors argue that there is an obligation on the part of government to ensure that they are as well-equipped as possible for adulthood, given that they will lack the parental support system typical of other children.

Support from families is widely recognized as "an important contributor to successful adolescent transitions to adulthood" (Ibid) so arguably the level of financial literacy training needs to be higher for children in foster care, prior to their graduation from the program, that would be the case for other teenagers the same age. Almost all former foster care youth struggle to achieve financial independence (Courtney & Heuring, 2005), and many continue to rely on public assistance.

53% reported in one survey major financial problems such as not being able to afford to buy food. It seems, based on the research, that there remain significant issues with respect to providing adequate financial training to children in foster care, though the authors note that many end up earning wages that are insufficient for them to escape poverty. A Federal Reserve report (2002) notes that financial literacy is a problem for members of the general public, much less for foster children.

Consumers in general have a lack of working knowledge about financial concepts and therefore do not possess the tools that they need to manage their everyday economic well-being. This is not just an issue with the foster care system. Training programs are being developed to address this need, and these programs will often target specific subjects or target markets.

The report notes, however, that "the effectiveness of financial literacy training have been mixed." In a follow-up report, Lusardi (2008) studied household saving behavior and found that there are very low levels of financial literacy, despite the efforts of policy-makers to remedy this. Few people, despite their ignorance, rely on outside help. Lusardi again finds that while there are programs, and these programs should help, they are generally not that effective and maybe need significant improvement.

In a later study, Lusardi, Mitchell and Curto (2010) specifically addressed the issue of financial literacy training for young people. It was noted that fewer than 1/3 of all young people possessed basic financial literacy. Financial literacy, it was found, correlated with sociodemographic characteristics and family financial sophistication. Wealth and education level were the most significant determinants of financial literacy -- like the saying goes, it takes money to make money. The Lusardi (2010) study has significant implications for policy regarding financial literacy training for foster children.

It shows that even if foster children have relatively low levels of financial literacy, they are not alone, and that supports Cook's findings as well. Therefore, training in financial literacy begins not with the design of a program for youth in foster care, but for foster parents. The foster parents need to have a high level of financial literacy so that they can pass this literacy down informally, as a complement to formal training. Reilly (2004) had noted that education alone was not enough, that other factors supported the training.

It would seem that there is informal learning, by participating in financial discussions or even simply being privy to them, that can contribute to one's overall financial literacy level. Doubtless, some of the learning occurs after the age of 18, an issue that will be difficult for social services agencies to address. But there needs to be training of foster parents to increase their financial literacy. Without that, it is the financial equivalent of learning French from someone who does not speak it.

Friedman (2005) has highlighted some key elements of a successful financial literacy training program for low-income youth, which can readily be applied to the education programs in the foster care system. The program should have relevant examples, everyday examples to put the concepts into proper context. Participants need to be encouraged and.