Helping Families Thrive Through Financial Coaching

For the past decade, the Local Initiatives Support Corporation (LISC), a national community development organization with an office in Indianapolis, has cultivated an asset-building model called the Financial Opportunity Center (FOC) that bundles one-on-one financial coaching and employment services to help low-wealth families move closer to financial independence.  FOC services are delivered by highly trained coaches in familiar settings – typically organizations with deep roots in the neighborhoods they serve.  Despite good results from this one-on-one approach and people’s stated desired to continue working with a coach, it is often difficult to retain them in a long-term coaching relationship.  To that end, LISC has worked with the Common Cents Lab at Duke University’s Center for Advanced Hindsight to test an approach to improved coaching retention based on the principles of behavioral economics.

According to the chief researcher on the project, Emory Nelms, “Regardless of how strong our intentions are, setting goals and forming intentions does not always translate into behavior. In fact, research has consistently found an ‘intention-action gap.’ We don’t always follow through or behave in the way we wanted to, often falling short of our goals in consequence.”

Based on insights from a detailed behavioral diagnosis, Duke designed potential interventions to address barriers faced by coaching participants. LISC tested two of these in twenty-four FOCs in ten different cities:

  • A visual goal-setting exercise in which participants select one of eight photographs that best captures the vision of their  financial future.

  • A postcard which participants write to themselves in the future as a reminder of what they want their financial future to be.

Initial results are promising.  Controlling for individual participant characteristics and variations among the sites, the visual goal setting exercise increased average retention.  Participants attended more sessions within three months of enrolling in the program.  While the postcard did not further increase retention, writing the postcard seems to have increased the average number of sessions attended and decreased the average number of days between sessions.

Nelms think there are several reasons why these interventions had positive effects.  He notes: “The visual goal setting exercise leveraged the emotional power of photographs to help participants better connect with their long-term goals. . . . When we “see” a photograph, we do not just see static images. Instead, we intuitively connect them as part of a broader context or story. These stories make it far easier for us to connect emotionally with images and photographs. This emotional connection is important because it helps participants to build intrinsic motivation as they work towards their goal.”

These interventions prompt us to reflect on reasons why participants fade from coaching.  Says Nelms: “It’s easy for us to think that ‘this just isn’t the right time for them’ or that ‘they will come back when they are ready.’  This places the responsibility with the participant when in fact the problem may be that we are not engaging them in the most effective manner.”  Thus a decision to engage with financial coaching may not be due to individual motivation. Other factors may be in play.  We should be alert to different ways of communicating with people about their financial goals in order to help them bridge the intention-action gap.

Read the full study from the Common Cents Lab here.

Tom Orr is a Senior Program Officer with LISC Indianapolis and a member of the Indiana Assets & Opportunity Network Steering Committee.