Financial coaching programs are increasingly popular services offered to help people with low and middle incomes navigate their finances. Despite these programs’ growing prevalence across the US, evidence about their effectiveness is still emerging. To add to the evidence base, Urban Institute staff evaluated a uniquely structured program in Delaware: $tand By Me ($BM).
For the past decade, the state of Delaware has offered the $BM financial empowerment program, which aims to improve the financial well-being of Delaware residents. The program’s structure as a public-private partnership and its focus on delivering free services through professional one-on-one financial coaching has helped it grow rapidly in size and scope to reach diverse populations.
In 2018, the state of Delaware and the United Way of Delaware contracted with the Urban Institute to understand whether the program has been successful in meeting its mission. For the past two years, Urban has evaluated $BM to holistically understand the program’s outcomes. Urban staff conducted interviews and focus groups with stakeholders and leaders connected to $BM, financial coaches employed by the program, and residents served by it. Urban also surveyed new program entrants, analyzed existing program data, and conducted a quasi-experimental analysis to understand changes in credit outcomes for people served by the program relative to a comparison group.
The research findings show that $BM clients overall are seeing improvements in their financial well-being, both in their perceptions of progress and on various credit metrics. Although elements of the program could be strengthened, its unique structure and approach offer lessons for other states and localities interested in offering similar financial coaching programs.
What Services Does $tand By Me Offer?
$BM strives to empower Delawareans to have more control over their finances. It offers many free services to all state residents, including financial literacy workshops, tax preparation, access to financial products and services, and planning assistance related to postsecondary financial aid.
$BM’s main service—the one documented in this report—is free, one-on-one personal financial coaching. Financial coaching differs from other financial counseling approaches because it is more individualized and grounded in the goals of each client, but also more holistic. Coaches collaborate with clients to set measurable and attainable goals to improve their financial well-being and become financially self-sufficient. In follow-up meetings, coaches help clients achieve their goals, often through short-term tasks, such as monitoring bank balances and managing credit scores.
Who Are $tand By Me’s Clients?
$BM serves diverse clientele across the state. In part, this is because the $BM program is delivered through host organizations serving an array of populations statewide, including people working for participating employers, child care staff and parents, high school students and parents in the lead-up to college, aspiring homeowners, the Hispanic/Latinx community, small business owners, people ages 50 and older, and people in workforce training.
Data in this study produced the following insights about $BM clients:
- $BM’s clients are racially and ethnically diverse. Fifty-five percent of clients identified as Black non-Hispanic/Latinx, 27percent as white non-Hispanic/Latinx, and 14 percent as Hispanic/Latinx.
- Most clients had full-time jobs, while 12 percent were unemployed. Clients tended to have relatively low incomes, with a median monthly income of $2,000. Ninety-three percent of clients had health insurance.
- Clients ranged in the amounts and types of debt they held before entering the program. Clients averaged roughly $47,000 in total debt balances. Nearly 40 percent had an auto loan and nearly two-thirds had a credit card. About one in five clients had a student loan and one in eight had a personal installment loan. Only one in nine had a mortgage.
How Do Clients Feel about $tand By Me?
Through our interviews and focus groups, we found that clients and coaches report the program is serving clients’ needs well. Clients and coaches see positive results from the coaching process, which motivates them to continue meeting. After only one session, clients report trust and rapport with their coaches and leave with increased optimism that they can tackle financial issues they were previously ignoring. Many clients have recommended the program to others in their networks.
Clients come to $BM with a host of financial challenges, with the most frequent including medical bills, credit and debt challenges, and poor financial management. In only a short time of engagement with coaching, clients and coaches report successes. For some clients, these successes include having a budget or savings cushion for the first time. Others report long-term successes like improving their credit after years of neglect, taking a vacation they saved to afford, or purchasing a home.
How Does $tand By Me Affect Clients’ Debt and Access to Credit?
To understand the outcomes of $BM’s financial coaching, we examined clients’ credit data before and after coaching and compared changes for $BM clients with changes for a matched comparison group with similar baseline attributes.
$BM clients saw improvements in their debt repayment and behavior, though these impacts are generally modest in size:
- $BM clients took active steps to improve their financial well-being and creditworthiness. Clients cured delinquent accounts. Curing, or bringing accounts that had previously late or delinquent debts back into good standing, generally increased for $BM clients. Clients cured an average of 0.24 more accounts than the comparison group.
- Clients reduced their medical and nonmedical debts in collections. Clients reduced the number of medical accounts in collections by 0.37 per person more than the comparison group. Clients also reduced the number of nonmedical debts by 0.08 per person more than the comparison group.
- Clients reduced their credit card utilization rates, frequently by getting an additional credit card. Clients lowered their credit card utilization rates by 5 percentage points relative to the comparison group. Clients added 0.15 more credit cards per person than the comparison group.
- Clients raised their credit scores by a small amount. Credit scores improved among coaching clients by 15 points but improved among the comparison group as well. The estimated impact of $BM is a four-point improvement in credit score.
$BM clients took advantage of their improved creditworthiness by taking on some new forms of debt:
- Clients expanded their use of credit cards. About a year after their first session, 71 percent of clients had a credit card. This was a 7 percentage-point increase over the comparison group.
- Clients took on more student loans. Before entering the program, about one in five clients and comparison group members had a student loan. The share of clients with a student loan rose 6 percent relative to the comparison group.
- Relative to the comparison group, we found no conclusive increases in the percentage of clients with an auto loan, personal installment loan, or mortgage.
The $BM program’s effects on clients’ debt levels are mixed:
- We find some evidence that $BM clients took on higher levels of debt, in the aggregate, than they would have without coaching. Yet we do not find increases in debt levels among individual types of accounts. Further, while clients’ credit card debt rose from baseline to follow-up, it was $422 less than the change for the comparison group—meaning the impact of the program was to decrease credit card debt levels relative to what they would have been without the program.
How Could $tand By Me Improve?
Coaches, clients, and stakeholders pointed to a few areas where they felt the $BM program could be strengthened:
- The program could better equip coaches to become financial experts. Although coaches found orientation training helpful, they felt underprepared in some topics related to saving, budgeting, and debt management and restructuring. This is likely because most staff were not previously employed in a personal finance field before becoming coaches.
- The program could better standardize materials and resources to share with clients. Coaches and clients were interested in greater promotion of the program and its benefits.
- The program could expand its offerings. Clients thought creatively about how $tand By Me could do more, such as youth-oriented programming, small group sessions, or adding extra coaches to high-demand locations.
What Lessons Does $tand By Me Offer Others Interested in Financial Coaching?
The $BM program offers a unique and compelling example of program design that other states and localities could consider when developing financial coaching programs:
- The program is accessible to all residents in Delaware without eligibility restrictions. This may help reduce some of the real or perceived stigma people feel when seeking help.
- The services are free, meaning that even those with very limited means can participate. The program has served nearly 16,000 Delawareans with financial coaching—a large figure for a small state, especially for a program that started in 2010.
- The program is a public-private partnership—a combination of state government, philanthropy, nonprofits, and local employers. The program therefore works in a range of venues, from for-profit employers to nonprofits to state-affiliated programs. The program’s leadership is jointly held between the state’s Department of Health and Social Services and the United Way of Delaware.
- $BM has integrated coaches in other human service environments and workplaces. Integrating coaches in existing agencies and offices can be challenging. Coaching work can be isolated from other activities, and recruitment can be hard. In Delaware, however, $BM has successfully integrated its coaches in several other contexts. Even though coaches did not have a client base at the start, they have been able to build demand for their services.
- The program emphasizes a culture of performance management and results orientation. $BM has developed a customized data system for tracking clients and coaches. This translates into monthly coaching benchmarks to demonstrate coaching activity.