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FOR EXPERT COMMENT: Young People Aging Out of Foster Care Are At-Risk for Financial Struggles, Exploitation, MU Expert Says

Teens need more support in order to become financially independent adults

September 17th, 2014

Story Contact: Jesslyn Chew,

The views and opinions expressed in this “for expert comment” release are based on research and/or opinions of the researcher(s) and/or faculty member(s) and do not reflect the University’s official stance.

COLUMBIA, Mo. – Saving money is a struggle for many individuals. For young adults leaving foster care, saving money can be more challenging. Without families and other social safety nets, teens “aging out” of the foster care system are at-risk for homelessness, criminal activity and exploitation, according to previous research. Now, a University of Missouri expert says states should provide more financial support to these teens before they leave foster care so they can learn to save money and become financially independent adults.

“Providing financial education is a critical first step toward breaking the cycle of poverty, but education is not enough,” said Clark Peters, an assistant professor of social work at MU.  “These young people can only invest in their futures if states invest in them first. They need practice with money and with saving, like all young adults do. If these young adults make mistakes when they are on their own, they may not have the option to move back home like many of their peers or call relatives who can loan them money. Oftentimes, financial struggles can be especially debilitating for those aging out of foster care.”

In many states, individuals who leave the foster care system at age 18 have strict parameters they must follow in order to receive financial assistance from the states in which they live. However, as soon as individuals make mistakes, as many young adults do, the support is trimmed, Peters said.

“In essence, the states are expecting these young adults to do what many adults do not — save enough money to pay for emergencies, such as unexpected medical bills or car repairs — and then penalizing them for their lack of experience managing money,” Peters said. “As a result, youth who have left foster care may get into a cycle of borrowing or relying on payday loans. Unfortunately, a few resort to criminal activity to make ends meet, or they may be exploited by human-traffickers.”

Matched-savings programs are a promising opportunity for teens leaving the foster care system, and together with financial education, the programs can help youth practice spending and saving wisely, Peters said. The programs are available in many cities throughout the United States and have been growing alongside federal legislation that provides support to states to provide foster care up to age 21. Peters, along with a University of Missouri-St. Louis colleague, Margaret Sherraden, studied young people who transitioned out of the foster system and participated in Opportunity Passport, a financial education and matched-savings program. The young adults who completed the program reported smoother transitions into adulthood and increased financial responsibility.

The Opportunity Passport program was developed by the Jim Casey Youth Opportunities Initiative, an organization that works to ensure that young people — primarily those between ages 14 and 25 — make successful transitions from foster care to adulthood. The initiative currently works in 18 sites across the country, although none are in Missouri. Additionally, other agencies have developed similar approaches, including matched savings programs, that can help other public programs work better, Peters said.

Peters said awareness is growing within human services to prepare young people for engaging with a complicated financial world, and he points to recent activity at the Consumer Financial Protection Bureau that provides additional safeguards against the exploitation of unsophisticated consumers. The CFPB has developed curricula and other materials to inform front-line professionals how to provide guidance on elevating financial capability, Peters said.

“The key to ensuring financial stability for these young people is allowing them to juggle responsibilities and even to make some mistakes — just as their peers outside the foster care system do — in order to truly understand how their decisions impact their finances,” Peters said. “As a society, we need to do more to give those leaving the foster care system the means to succeed so they can build assets and become financially independent adults.”

Peters previously co-authored the report, “Enduring Assets: Findings from a Study on the Financial Lives of Young People Transitioning from Foster Care,” with Sherraden. The report was commissioned by the Jim Casey Youth Opportunities Initiative, but the philanthropy had no role or influence in the findings of the report.

Peters is an assistant professor in the MU School of Social Work, which is part of the College of Human Environmental Sciences, and also is an assistant professor in the MU Truman School of Public Affairs. His research focuses on child welfare services, asset development, adolescents’ transitions into adulthood, engagement of youth in civil society and juvenile justice.