Evaluation White Paper

Low-Income Consumers

Low income consumers are those whose family incomes are below 80 percent of area median income levels (HUD, n.d.), and many of those with incomes below the federal poverty level are served by government assistance programs. These consumers are economically vulnerable and need help to increase their economic security and quality of life. Nielson et al. (2016) described some of the unique challenges they face compared to other consumers. Low income consumers have fewer employment options and unstable labor market opportunities. They are more likely to have a disability or responsibility to care for people with disabilities. They are more likely to lack access to health care and health insurance. As a consequence of these factors and others, their finances are often characterized by highly volatile income and expenses (Hannagan & Morduch, 2015). This group is therefore especially vulnerable to economic shocks and resulting material hardships.

In addition, low income consumers often have lower levels of education and financial literacy (Lusardi & Mitchell, 2011). As a result, they may lack familiarity with or exposure to certain financial products, services, tools and techniques, and advice for financial planning and management. They also are more likely to be underserved by financial products and services that are safe, useful, affordable, and convenient. For example, their higher likelihood of having no or a short credit history or low or no credit score results in limited access to affordable credit. Navigating public services also makes life more complicated and expensive in terms of time, energy, and mental effort. The above challenges can be compounded for some low income consumers, such as new immigrants from non-English speaking countries, by language barriers and limited understanding of the U.S. financial system.

6A: Key Programs and Resources

Financial education programs targeting low income consumers take various forms, but three types are noteworthy:


Financial education programs paired with financial products targeting low income consumers. One example would be individual development accounts (IDA) that are matched savings accounts helping people with modest means to save towards the purchase of a lifelong asset, such as a home (Grinstein‐Weiss et al., 2015). Financial education also can be included with other products such as home loans, bank accounts, and debt management plans (Roll & Moulton, 2016; Sherraden et al., 2016).


Financial education is integrated into social/human services such as workforce/employment support programs, child protection, child support, pre-school, food, health, legal aid, domestic violence disability and housing programs (LISC, 2016). For example, for economically vulnerable youth and young adults, financial education is integrated into programs such as summer youth employment programs, programs serving youth aging out of foster care, and higher education access and retention programs, including community colleges (Loke et al., 2015).

Instruction (counseling and coaching)

Financial education can also be provided in topical counseling such as credit counseling and homeownership (Delgadillo, 2016). It also can be provided through financial coaching, a form of financial education that generally involves one-on-one sessions between a coach and client to increase awareness of financial decisions and to provide support reaching financial goals, which is growing in popularity as a strategy to support the financial behavior and financial well-being of low and moderate income consumers (Collins, 2016; Lienhardt, 2015).

6B. Major Topics and Literature Review

Frequently considered outcome measures for improving the economic well-being of low income consumers focus on money management behaviors (Xiao, 2015). Included in the list of such behaviors would be financial goal setting and planning, paying bills on time, bringing past due debts current, or increasing the frequency of savings deposits, as well as financial outcomes such as sustainable employment, reduced debts, improved credit profile and increased savings, which are indicators of economic well-being (Xiao, 2015). Financial education programs for low income consumers are broadly defined in terms of instructional format and training so there is not one standard type. Each program often differs in terms of the financial information given, the financial knowledge and skills taught, and desirable financial behaviors that are encouraged (Xiao & O’Neill, 2016). The following are evaluation studies on the effect of financial education on the economic well-being of low income consumers related to financial education programs that focus on products, services, and instruction for low income consumers.

Several studies evaluate the effectiveness of financial education programs on low income consumers’ economic well-being. Researchers from the Center for Social Development at Washington University examined the impact of financial education on savings outcomes of participants in individual development account (IDA) programs. Data from a sample of approximately 2,000 participants in the American Dream Policy Demonstration showed that relative to counterparts who have not completed educational requirements, IDA participants who completed program requirements for financial education had higher average monthly savings, saved a higher portion of their income, and deposited savings more frequently (Grinstein-Weiss et al., 2015). A different study randomly assigned very low income families in a subsidized housing program to a mandatory financial education program and tracked them for 12 months (Collins, 2012b). The results showed that the financial education leads to improvements in self-reported behaviors and expanded use of credit, but no other measurable effects on savings or credit.

One recent study evaluated effects of financial education programs on low income youth. Loke et al. (2015) examined the impact of the MyPath Savings pilot on 275 economically disadvantaged youth participating in a youth development and employment program. MyPath Savings targets youth earning their first paycheck—a critical teachable moment to promote savings and connect youth with mainstream financial products, and peer developed and led financial education sessions. The results indicated that MyPath Savings contributes to significant increases in financial knowledge, financial self-efficacy, and the frequency of positive financial behaviors among the youth. Participants also saved an average of $507 through MyPath Savings.

Research shows that financial counseling encourages counseling clients to reduce undesirable debt behaviors and increase desirable behaviors (Agarwal et al., 2010; Elliehausen et al., 2007; Moulton et al., 2015; Roll & Moulton, 2016). Several organizations used financial counseling as a major education approach to help low income consumers. To improve the financial well-being of low income families, LISC (2016) adopted a bundled services approach. Through its network of 80 Financial Opportunity Centers (FOCs) in more than 30 cities across the country, they have offered three main services bundled together: one-on-one financial counseling, employment assistance, and help accessing public benefits that supplement income from work. The evaluation study shows that FOC participants receiving these bundled services have greater success in meeting their financial goals than do people in programs offering employment assistance alone. For example, their clients are more likely to be employed year-round, to reduce non-asset related debt, and to build positive credit histories than comparison group participants.

Karlan et al. (2012) partnered with a New York City-based credit union to examine potential effects of a commitment savings product and financial counseling among a low income population. The product, marketed as a Super Saver Certificate of Deposit (SSCD), allows gradual deposits toward a client’s savings goal but imposes penalties for missed goals or early withdrawals. They had randomly assigned credit union members to a SSCD product offer, an offer of free financial counseling, or a survey-only control group. They found strong demand for both the SSCD and counseling that is positively correlated with proxies for behavioral biases. 65.7 percent of SSCD holders avoided substantial penalties by holding to maturity, and the average closing balance was $910. However, only 32.3 percent of SSCD clients met their chosen goal amount, and they did not find significant evidence that either the SSCD product offer or the financial counseling treatment increases savings balances or net assets, or affects borrowing behavior, relative to the control group.

Researchers at the Corporation for Enterprise Development explored effects of financial counseling on financial capability and checking account use. This program integrated access to financial counseling into a workforce program for individuals transitioning off of TANF. The results showed that counseling clients were more likely to stay current on debt payments. Access to financial counseling is associated with a lower percentage of debt that is past due 12 months after starting the program. However, the study did not find significant improvements in banking access or use, although the overall rate of all POP participants being banked increased dramatically from about a third to over half (Wiedrich et al., 2014).

Researchers at the Urban Institute studied the effects of access to financial coaching at two different programs on low and moderate income consumers’ financial behaviors and outcomes using an experimental research design (Theodos et al., 2015). Consistent with the financial coaching theory of change, the authors found that consumers randomly assigned access to financial coaching achieved improvements in their day-to-day financial management behaviors, as well as in both objective and subjective financial outcomes such as stress, confidence, and satisfaction. However, the findings varied by the different program sites. At one site, participants increased their savings amounts and credit scores, while at the other they achieved significant debt reduction. One conclusion from this study is that, because financial coaching is a strategy focused on supporting clients in achieving their personal financial goals–whatever they may be, outcome evaluations of financial coaching programs cannot focus on just one or two confirmatory outcomes.

6C. Evaluation Practices, Strengths and Limitations

There are at least five issues related to collecting data for evaluations of financial education programs serving low income consumers that can affect the outcomes. First, exit from a human service program or the transient nature of population can make it difficult for long-term tracking and data collection. This is one reason why getting upfront permission to access credit files or other administrative data for follow-up outcome data can be useful. Second, family and household units are more dynamic, making follow-up contacts more complicated, and these contacts also are highly correlated with financial outcomes (e.g., if someone moves into a household, it increases income). Third, interviewer-assisted surveys may be necessary due to cognitive issues, disabilities and reading levels. Fourth, study participants may have more administrative data associated with them via other human service programs or benefits that they receive (Medicaid, SNAP, CPS, UI, etc.), which could be a source of evaluation data. Fifth, highly heterogeneous financial goals and outcomes make any one dependent variable inappropriate for some families (e.g., some need to borrow, some need to pay off debt). A final consideration related to evaluation design for low-income consumers is that, for clients in crisis, standard individual-level randomization or denial of service may not be possible or appropriate with a randomized control trial (RCT). In some circumstances, randomizing multiple treatment arms may make more sense than a treatment and control group design.

Information alone provided by traditional financial education is likely insufficient to improve the economic well-being of low income consumers in the absence of financial inclusion. Low income consumers are more likely to need additional support for action such as financial products that support a given behavior, counseling, coaching or peer support, access to language services, child care, transportation, etc. Basically, low income households need supports that address or acknowledge significant barriers this population may be facing in terms of financial health or forward-looking financial behaviors. Public systems, legal processes and polices may create further barriers to certain financial behaviors.

People need some level of stability to be able to focus on improving finances. If people are dealing with significant crises and lack of financial resources (e.g., those unemployed, or are dealing with loss of home, health crisis or other major disruption), financial education and other financial decision-making supports are not what is most needed. If consumers are in the mindset of financial crisis, financial counseling may be the right approach (e.g., credit counseling, foreclosure counseling). When these consumers have a stable situation, they may be more motivated to improve their finances and then financial coaching or an IDA program can help individuals refine and advance their personal financial goals.

6D. Public Communication

Providing effective, actionable financial education for low income consumers is important for them to better utilize social services available for them and enhance their financial capability to achieve greater financial well-being. Because of unique situations and characteristics of this special population, education approaches must be flexible with various forms such as teaching, informing, counseling, and coaching, and will typically need to be paired with additional supports such as appropriate financial products or various types of human services. Educational program content should focus on action that effectively uses available social resources and goal setting and planning to achieve life goals. Evaluating effectiveness of financial education for low income consumers should not only emphasize knowledge acquisition but also financial confidence and improvements in financial behaviors and outcomes.