Equipping Young People in Foster Care to Manage Their Finances

Youth who leave fos­ter care often say lack­ing basic knowl­edge about finances is one of the major chal­lenges they face as they tran­si­tion to adult­hood. Many have no expe­ri­ence han­dling mon­ey and, like all youth, find it dif­fi­cult to save for the future. Some have been vic­tims of iden­ti­ty theft or cred­it fraud and, as a result, have poor cred­it when they leave fos­ter care. Too often, young peo­ple try to rent an apart­ment, get a job or obtain a stu­dent loan only to learn their cred­it has been com­pro­mised. Even those with no cred­it prob­lems need help nav­i­gat­ing the com­plex world of finances.

Respond­ing to sto­ries of young peo­ple who have expe­ri­enced iden­ti­ty theft and oth­er finan­cial chal­lenges, Con­gress enact­ed leg­is­la­tion that requires child wel­fare agen­cies to order annu­al cred­it reports for all youth in fos­ter care begin­ning at age 14. This require­ment has cre­at­ed a unique set of chal­lenges for child wel­fare agen­cies with lit­tle knowl­edge of cred­it issues. Agen­cies now must set up sys­tems to request and inter­pret reports and work with youth who have cred­it prob­lems to dis­pute those prob­lems with busi­ness­es and cred­it bureaus. Despite these chal­lenges, the pro­vi­sion holds promise to ensure that no young per­son leaves fos­ter care with cred­it issues that can com­pro­mise their finan­cial stability.

The Foun­da­tion has sup­port­ed the imple­men­ta­tion of this require­ment in sev­er­al ways:

• devel­op­ing the Cred­it Check Learn­ing Com­mu­ni­ty for child wel­fare agency staff eager to engage with each oth­er and share imple­men­ta­tion chal­lenges and successes;
• pub­lish­ing Youth and Cred­it: Pro­tect­ing the Cred­it of Youth in Fos­ter Care, a guide on com­ply­ing with the cred­it check require­ment in a way that engages youth;
• devel­op­ing a Q&A on imple­men­ta­tion, which serves as a guide for state and local agen­cies respon­si­ble for imple­ment­ing the law;
• pro­duc­ing a six-part webi­nar series with guid­ance on how to imple­ment the require­ment and infor­ma­tion to increase basic knowl­edge about cred­it so that adults work­ing with young peo­ple in fos­ter care can under­score the impor­tance of a good cred­it profile.

The cred­it check require­ment has also stim­u­lat­ed inter­est in build­ing the knowl­edge and skills of all youth in fos­ter care, not just those with cred­it prob­lems, so they can suc­cess­ful­ly man­age their finances. While class­room learn­ing is cer­tain­ly a start, it’s impor­tant to note that noth­ing can match the real-world expe­ri­ence of decid­ing which car to buy or how much to save — or the val­ue of hav­ing a sup­port­ive adult to help one make wise finan­cial deci­sions when it comes to such experiences.

Still, a num­ber of resources are avail­able to help agen­cies take that first step in empow­er­ing youth. The Jim Casey Youth Oppor­tu­ni­ties Ini­tia­tive sites — many of whom have been offer­ing finan­cial lit­er­a­cy class­es and Indi­vid­ual Devel­op­ment Accounts (IDAs) to young peo­ple tran­si­tion­ing from fos­ter care for more than a decade — has iden­ti­fied a num­ber of dos and don’ts in this are­na. The ini­tia­tive has devel­oped a cur­ricu­lum with and for young peo­ple that includes fun and inter­ac­tive exer­cis­es. In addi­tion, the Children’s Bureau of the U.S. Depart­ment of Health and Human Ser­vices has cre­at­ed a finan­cial empow­er­ment tool kit for adults work­ing with youth younger than 18 and young adults tran­si­tion­ing out of fos­ter care.