Yesterday’s post introduced financial coaching as an increasingly popular intervention targeted to low- and moderate-income households to help them achieve financial stability. But despite its prevalence, coaching has not been evaluated using the most rigorous approach available.

Today, we highlight findings from our study of two financial coaching programs that serve low- and moderate-income populations: Branches in Miami, Florida and The Financial Clinic in New York City. This study involved a randomized control trial (RCT), funded by the Consumer Financial Protection Bureau, and a companion study of program implementation at the two sites, funded by the Annie E. Casey Foundation.

RCTs like this randomly assign study participants into two groups: one group (the “treatment”) is offered services, while the other (the “control”) is not. Study enrollment and recruitment ran from early 2013 through March 2014, and we compared “before” and “after” indicators for both groups using surveys, administrative data, and credit bureau reports.

We found a number of significant and robust effects on a range of outcomes related to money management, debt, savings, and other measures and perceptions of financial well-being:

• Savings: Average total account balances at the end of the study period were higher for the treatment group than for the control group at both Branches and The Financial Clinic. However, only at The Financial Clinic were the differences statistically significant. Controlling for other factors, those offered services (the treatment group) increased their account balance by $1,187 relative to the control group. If we omit those offered services but not attending any sessions, those who actually took up services (the “treated treatment”) increased their balance by $1,721 relative to the control group.
• Debt: Results for debt were in some ways the mirror image of what they were for savings. While at the end of the study period those in the treatment group in both programs had lower debts than the control group, only at Branches (where debt levels were higher on average) was the difference statistically significant. There, those in the treatment group had, on average, a reduction in debt of $10,644 relative to the control group.
• Credit scores: After coaching, scores at both sites were higher for the treatment group than for the control group. But the difference was only statistically significant at The Financial Clinic, where those in the treatment group had credit score increases of 21 points compared with the control group; those who actually took up coaching had average increases of 33 points compared with the control group

What are the key takeaways?

This study suggests that a well-implemented coaching program with engaged clients can produce important improvements in certain financial outcomes, although financial coaching may not work equally well across all programs, clients, or outcomes. The different effects found for the two sites in this study could be due to a number of reasons, from differences in program implementation to differences in participants’ personalities and goals.

It’s also important to note that we found a number of robust program effects despite relatively low attendance rates: of those in our study given the opportunity to take up coaching, only 37 percent at Branches and 56 percent at The Financial Clinic did so. Even those who did take up coaching attended relatively few sessions: of those attending at least one session, the median total number of sessions attended at both sites was two.

While coaching is a fairly expensive and high-contact intervention, its benefits as found here warrant its consideration as a complement to more traditional financial education or counseling interventions and newer persuasive technologies, such as text message reminders or phone apps.

But financial coaching—or any financial education effort—should not be the only approach to help consumers improve financial well-being. They also need access to sound, straightforward, and low-cost financial products, and a regulatory environment providing broad protections within which they can make their financial decisions.