Youth Perspectives on Their Financial Lives and Saving in Opportunity Passport TM Accounts

1. Youth Perspectives on Their Financial Lives and Saving in Opportunity PassportTM Accounts Clark Peters, PhD, University of Missouri Margaret Sherraden, PhD, University of Missouri – St. Louis Ann Marie Kuchinski, MA, Research Assistant, University of Missouri

2. Key goals of the project • Gain insight into the financial lives of youths transitioning out of foster care into adulthood • Understand youths’ experience in the Opportunity PassportTM program from their own perspectives

3. Outline of the presentation • Existing research • Project protocol • Sample selection and demographics • Findings • Financial services • Financial management • Factors that affect savings • Unmatched withdrawals • Program effects

4. Insights from existing research on transition from foster care to adulthood • Having few financial resources, former foster youths likely to face difficulty transitioning to financial independence • They tend to rely increasingly on biological family connections • Tenuous and troubled nature of adult support is likely to compound financial difficulties

5. Questions emerging from a review of the relevant literature • What are the financial experiences young adults exiting foster care? • What are the roles that kin and other influential adults play in the financial lives of these young people?

6. Project protocol • Reviewed literature • Developed instrument • Analyzed program data • Worked with sites to prepare for visits, identified respondents • Interviews in four sites • Pilot: January 2011 • Three sites: April – May 2011 • Transcribed and analyzed • interviews • Receive feedback on key • findings • Final report

7. Respondent sample • Staff: 8 interviews • Participants: 38 interviews • Participant demographics • Average age 21.3 years old (18 – 23 years old) • Mostly female (79%) • Black (47%), White (37%), Multiracial (16%) • 27 (71%) had 3 or fewer foster care placements • 11 (29%) are married or living with partner • Participants: A diverse group, developmentally and in terms of life experiences

8. Findings: Financial services • Checking and savings accounts at mainstream institutions (Bank/CU accounts, checking, debit, ATM, online) • Check cashing and money orders at alternative financial institutions (CCOs, retail grocery stores) • Prepaid card services (e.g., Green Dot) • Credit: Credit cards, RALs, payday lenders, pawnshops • Cash • Tax services:commercial (e.g., H&R Block) and non-profit (VITA sites) • Rent-to-own

9. Findings: Financial management • Using of simple rules of thumb for paying bills • Seeking efficiency • Set aside small amounts to cover unanticipated expenses • Identifying strategies for shortfalls • Asking for an payment extensions, getting emergency grants, moving in with a relative • Most are worried about accumulating debt • Troublesome high cost expenses • Mobile phone, transportation, and medical emergencies

10. Findings: Individual factors that affect saving • Income (e.g., job, state stipends) • Availability of tax refund or credit • Low expenses (efficiency, sharing expenses) • Access to transportation • Willingness to remain engaged with CW services • Self control and “ignoring” savings • Triggers to save • Role models and partners • Level of trust in financial institutions

11. Findings: Program features that affect saving • Guidance and encouragement by staff • Financial education • Savings match • Opportunity PassportTM participation stipends • Savings target as goal • Saving strategies • “Whenever possible” • “Ignore it” • Automatic/direct deposit • Lump sum deposits • Restrictions on withdrawals

12. Findings: Unmatched withdrawals • Some youth are resentful that they cannot readily withdraw their own savings • Some youth understand the reason for rules discouraging unmatched withdrawals • For some youth, restrictions act to inhibit deposits • The unintended consequence of restricting access to personal savings

13. Conclusions: Opportunity PassportTM program operations • More rules may confuse rather than encourage savings • Simplicity and appeal of 1:1 match seems to be a key feature • Efforts to instill a “savings habit” may not work • “Door openers” reach few • Financial emergencies create a challenge for participants and the program

14. Findings: Opportunity PassportTM program effects • Matched Opportunity PassportTMsavings withdrawals • Introduction to traditional financial services • Financial counseling and planning • Chance to learn from experience • Peer and adult support • Enhanced educational opportunities • Intergenerational effects

15. Conclusion: Financial services • Barriers to using traditional financial institutions leads many to other means of savings and financial tools • Not all alternative financial services are alike: participants use some that are sensible (e.g., inexpensive check cashing) as well as some that are ill-advised (e.g., rent-to-own) • Checking accounts of limited use

16. Conclusion: Overall outcomes • Youth seem to have a greater connection to mainstream financial services, but are also enmeshed in alternative services (e.g., money orders, check cashing). • Youth have gained financial management skills, but it’s difficult to disentangle program effects from maturation. • As youth emerge from foster care services, Opportunity PassportTM may be viewed as simply another opportunity to obtain resources; they may not associate Opportunity PassportTM as a bridge to a distinct phase of life. • Some youth credit the program with being a critical component of their effort to successfully transition to adulthood.

17. Implications for program and practice • Is there a way to integrate support from peers and kin in encouraging good financial management and saving? • How can the developmental stage of participants be identified and matched to Opportunity PassportTM possibilities? • Are there ways to explore how to encourage more savings at tax refund/credit “windfalls”? • How to balance the paternalism of limited account access with the need to address the often dire needs of young adults? • How to optimize the array of financial products for each participant?

18. Future research • Experimental research to sort out independent contributions on saving performance of financial education, match, targets, program support, and other program components. . . • . . . and to disentangle development of financial management skills from “natural” maturation. • In-depth research to better understand use of financial services and the role of triggers to save.

19. Youth Perspectives on Their Financial Lives and Saving in Opportunity PassportTM Accounts THANK YOU

20. Findings: Financial management

21. Using rules of thumb Participants projecting their regular income sources and allocating them first to necessities, such as paying rent and food, and then allocating surplus to other expenses. “So I do my bills first. Whatever I have left I shop with. I make sure my money lasts me until I get another check, so I can budget out for like the whole two weeks. I get paid every two weeks. I do it like that.” (Shondra, 19) “The only person that get their money on the first is the rent.” (Monica, 22)

22. Seeking efficiency Participants share costs with someone else, use budget payment plans, bundle communications expenses, avoid using a car, buy at discount stores, eat at home, and avoid frivolous expenses. “Yeah, we [roommates] share pretty much everything, the costs for everything, all the way down to, if we buy a $5.00 movie, we split it half and half.” (Rachel, 21) “It’s easy to get caught up in spending when you get excited about something, especially my daughter like at birthday time and stuff like that.” (April, 21)

23. Seeking efficiency, continued Efficiency includes evaluating the necessity of a purchase. “Before I make a financial decision, I debate on what else I could have used the money for and what like might be more important. So if this might be like something that's real frivolous that I could just live without, go like months and months without, then I won't spend my money towards like deciding I need something within two days or I need it now. I’d rather pay for something that I may need or will need instead of paying for something that's frivolous that I’m going to forgot about.” (Kiara, 20)

24. Worry about accumulating too much debt Of recurring concern are medical and educational debt. “I mean. . . just the word debt scares the crap out of me. You know what I mean? . . . . The whole world is in debt. . . [I pay] bills first and not be so much in debt that we can’t handle it. I’m telling you, debt is my number one motivation. No debt.” (Nicole, 22)

25. Findings: Financial services

26. Using a variety of financial tools “We use money order only for rent, I write checks from our bank account for like electric and water and all that and I use cash or a debit card for the car. Well, the car is cash. But for like the Rent-A-Center stuff, either cash or card.” (Rebecca, 20)

27. Pawn shop “Well, you know, it was when I was in [nearby city], when I had no money. You know, I was trying to find a job and everything. I wasn't really getting lucky, so pawned off some of my games for my PS3 and my movies, all that good stuff, you know, made some money.” (Mike, 19)

28. Relying on cash “Yeah, I had a, what are those little lock boxes, I would keep it in there in an envelope.” (Hannah, 21) “I got bank accounts, but there’s no money on bank accounts. I’ve been saving – I – it’s a little – I just started saving so I put it in my little shoebox in my apartment.” (Tiffany, 20) “[I store my money] somewhere like up in my room or something like that. So let’s say maybe I’ll fold up – let’s see – a $100 bill and then a 50 and then a couple 20s, and then fold that up, and then that’s one bill.” (Daniel, 23)

29. Rent-to-own “And then that income when I, it still ain’t going [to savings], it going on the rent and the lights and the furniture rentals I got. Still ain’t goin nowhere . . And then the furniture that I rent is a seven piece plus the two screens and all that stuff that’s like give me a total of four hundred and something so it’s really not really going no where that’s just the check amount every month and the SSI. (Kyle, 18) I did that once. And I’ll never do it again, either . . . I got my coffee table, my end tables. And oh my gosh . . . And over expensive. Overly charge ya. It’s supposed to be a $300.00 set. I think we paid like 600 for it. . . . That was when I was in the trailer. Young thing again. Never happen again. [Laughter] (Darla, 23)

30. Findings: Individual factors that affect saving

31. Regular income for saving: Jobs and state stipends “We put money in. We put a lot of money in. . . . I think it was like $100 a week when we were both working. [But now without jobs,] We can't really [save], at this point. We're basically living paycheck-to-paycheck.” (Taylor, 20) “. . . If every time you get some money, you gotta do all this stuff with it. By the time I get the money and spend it, you know, theydon't be nothing left for me to put nothing in my account.” (Yolanda, 22) “As long as you were working and going to school, you got [the state stipend of over $500] a month. At that time, that was just coming to me and I was working on top of it.” (Amber, 22)

32. Tax returns for saving “I usually, when I get paid, I usually cash my checks and it turns around and goes right to a bill. So I mean, when I get my taxes, that’s usually when I can save up a little more…. A little bit of a head start. Just a little bit.” (Darla, 23)

33. Transportation costs hinder saving For some participants with student passes, public transportation is low-cost or free, but for most, travel is a considerable expense. “[I prefer] doing online classes because getting there is too difficult, and bus passes are outrageous.”(Allison, 20) “I was missing [classes] too many days because I couldn’t make it back and forth. . . I did have my own car at that time, but I didn’t have the money for the gas and then my car kept messing up.” (Hannah, 21)

34. Willingness to remain engaged with child welfare services that help with saving “Kind of being in and out of different homes and then the last year being at this last one. It's not anything personal toward anybody. It's just that I wasn't able to be a teenager. I wasn't able to go out and hang with my friends like I would be if you were with your parents normally. . . I remember a couple of times that it was almost like a déjà vu feeling but kind of like anxiety. I kind of felt like, ‘Oh my gosh, I'm still here.’ I felt like I was in prison, and I'd have these like, ‘This isn't my house, and I'm still here.’” (Amy, 23)

35. Self control affects ability to find money to save “It’s just about control. Like you’ve got to think about the stuff that you want, and the stuff that you need to get. . . . I’m doing better now. Way better since I’m so much tighter now. . . . So you’ve got to think about, have self-control over yourself with your money. That’s all. If you can’t control it, ain’t nobody else going to help you control it. They’re going to help you spend it. So you’ve got to keep an eye on it.” (Kiara, 20)

36. Self control through “ignoring” savings “What makes it easier is if you just think about if you put this money up and hold on to it and I add some more to it then be like it can accumulate over time, it can accumulate to a nice amount and you won't even – you not gone even lose any sleep over the money. It's just building up and then when you want to use it, it can be useful for that something that’s worth it.” (Thomas, 21) “I don’t even touch it . . . I like to keep it on the back burner . . . . That’s how I do it. I’m like, ‘You do not have no money. You are so broke. You have just the change at the bottom of your purse’ . . . . I try to just forget all about it. Put it in the back there and don’t even remember.” (Darla, 23)

37. Self control, continued • Single mothers seem to have a heightened sense of importance of saving, but less means to do so. • It’s difficult not to spend: • “What makes it hard is like you just see something that think you’ve got to have it and you just want or those cravings.” (Thomas, 21)

38. Triggers to save help “When I get my school check, that’s pretty much my reminder [to make a savings deposit].” (Beth, 22)

39. Role models and partners can also remind “Save money, save money, save money. That’s all he [partner] does. He doesn’t spend anything, ever. Which is okay, cause at least somebody can save in this relationship. [Laughter] I don’t have the money to save. And I’m like, ‘Good. You save, so I can spend your money.’ [Laughter] He’s pretty good about it. And my grandparents, my dad’s parents, they’re very good about saving. ‘Did you get paid today? Well, you should probably put money in the bank and put it in your account where you can’t touch it.’ My grandma.” (Darla, 23)

40. Role models and partners, continued “I figured it out on my own, with the help of my girlfriend yelling at me. [Laughter] So, yeah, I just came to the conclusion, like, yeah, so if someone says, “Hey, let’s go club here,” I’m like, “Oh, okay. No, I’m fine. I’m going to save my money.” (Christopher, 21) And my grandmother helps, too. I give her something. Like if I think it’s going to burn a hole in my pocket or I have a tempting moment, I give it to my grandmother, and just tell her to put it up for me, and don’t give it to me. And she won’t. (Kiara, 20)

41. Role models and partners, more Not all partners are positive influences, however: “[My mother] thinks that I owe her something for choosing to stay in care. And I do understand like yeah, it cost money, but I’m not the reason we were placed in the care in the first place, so and I mean, I’ve said that before and so it just causes fight, so I don’t say it anymore, she knows how I feel . . . She doesn’t let me forget it either, so I just-, part of the reason I had to move out.” (Megan, 22)

42. Findings: Program features that affect saving

43. Staff guidance, education & encouragement help youth to save “Sometimes I had to be reminded by my DHS worker or –– or my caseworkers at the time.” (Amber, 22) “So they taught me to think twice about getting your money [out]. Taught me a lot of stuff that helped me mature . . . they really taught just to like always think fully. Don't make just a slight decision, like, ‘Ooh, I want this,’ and just go. You’ve got to think like double – think some things. You can't just be stuck and go and all the time. Sometimes you’ve got to stop at the red light and sometimes you’ve got to look both ways.” (Christopher, 21)

44. Staff guidance, education & encouragement, continued “Staff, they help us decide our budgets and stuff about how much we want us to put in there.” (Louise, 23) Staff advice: “. . . A worker had told me before, she was like “I used to save . . . $10 a week” from when she was a certain age up to a certain age. And I did the math with that and I was like “Wow!” I’m like if I could do that – by the time I’m 30, I have this much! So I try to look at it like that. Just putting a few pennies away a day or whatever . . . it helps.” (Jasmine, 23)

45. Financial education also helps savings “And we learned – like we went through this whole book of everything from like credit cards to, you know, saving money and just everything about it. So –Yeah, I remember it. I do. I think still even have the book [Laughter]. But – so it was – after like living, growing up in a family that didn’t pay attention to that or didn’t pay their bills or didn’t have good credit, you know, now I know what credit is. I didn’t then, but [laughter] – it was – I liked the class. It was very interesting to me because I knew I had to do it different, you know. . . So I really did learn a lot in that class, and I took a lot of it with me.” (Nicole, 22)

46. Savings match is important “I’m always thinking ‘double my money.’” (Jessica, 20) “. . . If I put fifty in, they gonna put fifty in, that’s automatically gonna be a hundred right there. So I keep doing it, it’s gonna grow, grow. Go up a hundred every time I put fifty in. That’s why I put fifty in.” (Justin, 18) “I guess it really surprised me for like to put $1,000 in, they matched $1,000, up to $1,000. It was just like – is this really for real?” (Amber, 22)

47. Savings match, continued “And they match whatever you put in your account, and that’s huge, and that’s only for the big stuff, like the car and stuff. If you just put money in there, they don’t match that, but if you’re matching towards something, then that’s when they put the money in there.” (Allison, 20) “So we little bit closer to that car. You know when we was doing it by ourself we probably goin’ two three four years, you know, trying to get to the point where we can just put money in there and they’ll match it and then they’re helping us out. . . .You know so it’s a BIG help. It’s a big step.” (Kyle, 18)

48. Opportunity PassportTM participation stipends are a regular source of savings “I took my surveys – which they put $20 in my account every time I take a survey. So that kind of built my little savings up a little bit, and then . . . I started putting money in there myself.” (Jessica, 22) “Like when I do the surveys, I just leave the money and then let it sit. Let me forget all about it. Let it come back to me a couple of years later, and have built interest. And I’m like, ‘Okay. Cool.’ They put the money into the IDA. And I just don’t touch it. . . . I let that stack ‘cause they’re giving it. They’re putting money in my account every month, so I just let that money stay up.” (Monica, 22)

49. Savings goals help focus on saving “We have savings goals. We had paperwork. We had one of these surveys that it was on paper, and they were saying like, ‘Three years from now, what would you do with your money?’ …I don’t know what I said because that was so long ago, I probably had said like… ‘I'm gone get a house or I'm gone get a car,’ but now if they were to say …like, ‘Three years from now, how would you feel like you want your life to be?’, I would say, ‘Personally, I want to be in a mansion. I want to be with two nice jobs that’s paying $14 an hour’ . . . because I'm by myself, I don’t have no kids …So I feel that I should have more but I have to keep my mind – I have to keep focus so I can get there. So, that’s how, yeah.” (Karen, 21)

50. Savings goal, continued “I need to find like a goal on what I wanna get, and then once I get that goal in my head to where I wanna get, then I’ll start saving more.” (Jessica, 22) Often youth have several goals: “I saved up for that and then used my IDA matching . . . . to put a down payment on a car . . . . And then also, it helped with my first like installment of insurance, which was cool. I also saved up for a computer in the past. Things like that.” (Megan, 22)