The mission of the Consumer Financial Protection Bureau (CFPB) is to help consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. Within the CFPB, the Office of Financial Education is responsible for developing and implementing initiatives intended to educate and empower consumers to achieve their own financial goals. The Office of Financial Empowerment focuses its work on empowering low-income and economically vulnerable consumers to make informed financial decisions by providing them with tools and information and promoting a more inclusive and fair financial marketplace.

 

For economically vulnerable consumers who have limited financial resources, even the smallest financial decisions can have consequences. Financial instability can contribute to extreme stress and health issues, and can also put stress on family life.  Providing effective financial tools to help our most vulnerable consumers manage their financial lives is an important priority. One of the tools the CFPB  is working with is financial coaching.

 

Financial coaching is a method of providing financial education where coaches provide one-on-one advice and encouragement in a process largely driven by the client.  A financial coach helps individuals set or refine personal financial goals, develop plans to take action towards those goals, and ultimately increase their own financial stability. Evidence from prior research suggests that coaching can be effective in helping consumers achieve both short- and long-term financial goals. Coaching and counseling programs offered at nonprofit organizations and financial service providers across the country have been associated with client outcomes such as increased savings and participation in retirement plans, improved credit management, and in the case of counseling, reduced likelihood of default on a mortgage.

 

The CFPB has two projects specific to coaching, described below: a first-of-its-kind study on two financial coaching programs, designed to establish what impact access to coaching has on client’s financial outcomes, and the Financial Coaching Initiative, an effort to directly provide financial coaching services to economically vulnerable consumers and veterans transitioning out of military service.

 

Financial Coaching Study

In 2011, the CFPB commissioned a research study on the impact of two different financial coaching programs on how consumers manage their financial lives. In response to a growing call in the financial education field for more evidence to indicate how and when financial education strategies can improve consumer financial decision making, this study  -- through its randomized control trial design -- provides stronger evidence of what works, and subsequently better supports and guides financial educators as they strive to empower their clients. The study, conducted by the Urban Institute, examined two very different coaching programs serving different groups of consumers in very different communities - one at Branches, a faith-based social services organization in Miami and the other at The Financial Clinic, a nonprofit financial services organization in New York City. The results of the recently-released study found that financial coaches can help clients achieve financial outcomes that are most relevant for their own situations. The study showed that on average, people offered access to financial coaching experienced the following outcomes, compared with people who were not offered access during the study period:

• Increased savings by almost $1,200 in New York City
• Reduced debt by over $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.

 

These outcomes point to improved financial well-being, and they suggest that access to financial coaching helps consumers gain more control over their finances, improve their capacity to absorb a financial shock, and get on track to meet their individual financial goals.

 

Financial Coaching Initiative

Launched in May 2015, the CFPB Financial Coaching Initiative provides guidance to recently-transitioned veterans and economically vulnerable families seeking help from social service providers and working to get on the path to financial stability. This initiative has placed 60 certified coaches at organizations around the country.

 

For the veteran population served, financial coaching is provided primarily at Department of Labor-funded American Job Centers. Servicemembers who are transitioning to civilian life often face unique challenges during this time. They must adapt to the financial aspects of civilian life, such as paying taxes and managing insurance, health and retirement plans. Many of these servicemembers went directly from school to the military, so the move to civilian life and a less structured environment poses new and often stressful financial issues.

 

For economically vulnerable consumers, financial coaching is provided at various nonprofit organizations. These consumers may have limited access to mainstream financial services, which can lead them to rely heavily on higher-cost alternative financial services. Living in the financial margin, they can derive great benefit from in-person, individualized guidance delivered at a trusted, convenient location.  The CFPB’s Financial Coaching Initiative seeks to empower both of these vulnerable populations to proactively take control of their finances at crucial moments in their lives.

 

Consumers face many complex and consequential financial decisions throughout their lives.  A financial coach can serve as a capable and trusted guide to help consumers navigate those decisions, especially consumers who do not have access to professional financial advisors or to experienced financial mentors among their family and friends.  These efforts on financial coaching will inform the CPFB’s work on empowering consumers to achieve their own financial goals,  and we hope it will provide similar value to others working toward that same goal.

 

To learn more about the CPFB’s work, visit the CPFB website at www.consumerfinance.gov.