The Central Indiana Community Foundation (CICF) was introduced to financial coaching as a solution to a problem. We received impressive reports showing thousands of people received emergency assistance, financial literacy, and job readiness training to increase their financial stability. However, there was no way to tell if families actually broke the cycle of poverty, especially when data began to show the number of returning clients to these services.

 

In 2006, Indianapolis was selected by the Annie E. Casey Foundation to pilot the Center for Working Families (CWF), a model that integrates financial coaching with employment and income support services. The new model had no track record of results, but our leadership recognized this was an opportunity to pioneer a way to measure financial stability to guide effective philanthropic investments. CICF partnered with the Local Initiatives Support Corporation (LISC) to explore how to measure financial stability using relative indicators of improved financial conditions – increased net income, net worth, and credit scores.

 

Over the last six years, CICF’s board gained significant insights from tracking these outcomes: those who received financial coaching with other services were three times more likely to increase net-income, net-worth, and credit scores than those who did not; the longer people stayed with a coach the more their financial bottom-line improved; and building assets took at least three years to be realized. Our investments had greater impact even though grantees served fewer people and it took a longer time. It taught our board that a job was not enough. Fighting poverty takes a trusting relationship with a coach to help families work towards long-term goals to build assets.

 

Based on the success of financial coaching, a group of local funders now aims to expand the CWF model to other communities. However, as we reviewed our collective impact to date, we realized we could not answer a crucial question: are people actually moving out of poverty? Increases in net-income could be $10 or $10,000, or from a negative to a less negative number. Funders could not tell how close, or far away, people were from being able to save, or if they were saving.  We knew financial coaching increased financial stability, but to what extent?

 

CICF decided to embark on a journey to explore how other financial coaching models measured success. Some models track absolute financial conditions. For example, SparkPoint Centers track how many people reach a self-sufficient wage, 650 credit score, and three months’ worth of savings. These outcomes allow staff to understand how coaching helps clients reach conditions of financial stability. However, this prompted more questions: first, if a person has three months of savings, is it because of some one-time event like a tax return, or new behavior, namely, consistent saving habits? Second, these outcomes take years to reach. How can a person’s success be measured over time?

 

Other financial coaching models measure behavioral outcomes. The Financial Clinic tracks behavioral changes including if people made consecutive savings deposits or set and achieved short-term goals. These outcomes indicate whether coaching impacts a person’s ability to make informed financial decisions and keeps coaches accountable to the process of financial coaching—helping people achieve their self-defined goals.

 

However, this begs a hotly debated question: Are behavioral outcomes the end game of financial coaching?  While some practitioners argue yes, others, especially funders, look at behavioral outcomes as a means to financial stability. If Alice makes regular deposits, is she in a better financial position than before?

 

CICF then explored a different approach.  Most accountability frameworks track success against a static set of milestones including behavioral outcomes, financial conditions, or relative indicators as discussed above. An alternative is to measure on a continuum of financial capability benchmarks, such as the Financial Capability Outcomes Matrix (the Matrix).1

 

The Matrix has a series of financial capability life domains such as income, money management, financial services, and credit. Each life domain has different stages of progress, or benchmarks, in ascending order: in crisis, vulnerable, stable, safe, and thriving. The example below outlines the incremental stages for the life domain of “money management.”

 

Money Management

The Matrix is an assessment and outcomes management tool. At program entry, coaches can plot a person’s status in each financial capability domain. The exciting part is seeing movement—movement within multiple aspects of financial capability from one stage to the next depending on where the person starts. If Joe starts out “in crisis; unable to pay bills, expenses exceed income” you can celebrate success when Joe reaches “stable; able to pay all bills, expenses do not exceed income.” Has he reached financial stability? No, because he has no savings and needs to improve other domains such as credit. But you can see how close, or how far away, Joe is from living paycheck to paycheck.

 

The Matrix might help us obtain data from grantees that show people actually moving out of poverty.  It could allow us to track how relative indicators, such as increased net-income, translate into improved financial conditions, such as how many reached self-sufficient incomes. We could also review how clients improve over time by tracking how many clients move up a benchmark and not just reach static milestones.

 

The Matrix might also help us understand how to set outcomes that allow coaches to truly be accountable to client goals rather than viewing clients as an input to achieve goals set by funders. Making grantees accountable to static milestones sometimes drive coaches to improve clients’ budget or credit independent of their goals. However, after exploring the Matrix with several grantees, coaches saw this as tool to help clients set and track goals in different areas of their financial lives and measure how behavioral change and goal attainment translates into long-term financial gains.

 

CICF and the United Way of Central Indiana are working to pilot the Matrix at several CWF organizations. We hope to learn how this approach can help funders capture data showing movements. We also hope to learn how this tool helps clients define aspirations, choose goals, and make decisions within different aspects of their financial lives. Ultimately, a continuum of financial capability benchmarks would allow us to celebrate the journey of someone moving from poverty to stability, and from stability to financial well-being.