Quantifying Financial Security

Financial Capability Scale and Well-Being Scale

Navigating the field of financial coaching, although intensely gratifying, can often be a difficult and confusing journey. Organizations and practitioners providing financial coaching serve customers from diverse backgrounds and unique situations, which makes it important to pinpoint the specific needs of each and to have a system to understand the nature of various financial situations. Thanks to a new national study that conclusively demonstrates that financial coaching can make a measurable difference in an individual’s financial well-being, we look for ways to define an individual’s own sense of financial security.

In this article, the Clinic explores two tools that were created to measure this very issue: the Consumer Financial Protection Bureau’s Financial Well-Being Scale and the Financial Capability Scale (“FCS”) created by the Center for Financial Security at the University of Wisconsin-Madison.

Both the FCS and the CFPB Financial Well-Being Scale comprise a series of questions that can be asked of financial coaching customers with a system for scoring customer responses. The generated score can then be utilized at the programmatic level both by comparing scores across customers and by tracking progress of the same customer over time. The scales also offer highly insightful questions, the responses of which can be used by financial coaches to identify the most appropriate next steps in a financial coaching engagement.

The FCS asks highly detailed questions and offers response options that are mostly binary. 1 Conversely, the CFPB Financial Well-Being Scale asks significantly shorter questions that offer a broader range of options. The scales also differ due to their intended design: The FCS aims to measure its respondent’s financial security or financial capability, while the Financial Well-Being Scale seeks to further measure its respondent’s financial well-being. It is a slight difference in language, but a rather large difference in meaning. Financial security or capability is more focused on behavioral measures, for example paying bills on time and consistent savings, while financial well-being is more focused on an individual’s perception of their financial situation, including level of financial stress and other less tangible factors.

A sample question from each scale is presented below:

When the Clinic developed the online platform Change Machine to provide practitioners with the tools and resources to increase the impact of their financial coaching, the FCS was integrated to better understand customers’ financial insecurity. Since implementing the FCS in 2012, the Clinic has seen positive correlations between the financial security outcomes achieved by customers and their change in FCS score. Where Clinic customers have more outcomes, they also tend to have a greater rise in their FCS score, as depicted in the graph below:


This analysis shows a positive correlation (.251) between changes in customer FCS scores and quantifiable outcome achievement. For example, customers whose FCS score increased by 2 or more points on average, also achieved 1.8 quantifiable outcomes. (For information on the Clinic’s outcomes framework, please read Building Financial Security through Financial Coaching)

When asked how the FCS affects her work with a customer, Clinic coach Alma Rojas describes how “the FCS questions are so aligned with the Clinic’s mission that I intuitively used them to create a framework for my coaching meetings. Based on how customers answered the questions, I would know what we needed to focus on during the meeting.” She agrees that customer responses to these questions determine her next steps, especially in the very first meeting with the customer when they are asked about their ability to pay for unexpected expenses and emergencies, if they had late payments in the last two months and whether income is more or less than expenses.

Alma also feels that using the FCS inspires her to learn more about her customers’ well-being by expanding upon their answers:
“I find it interesting that although the questions have fixed responses (often binary), you can still learn a lot about a customer’s behavior/mindset and current situation…. Sometimes, the answer is like an emotional-reaction: They don’t believe they are capable of achieving their goal or they just don’t know how, because they might not have the knowledge or resources. But I always remind them that they took the hardest step already by reaching out and coming to me and that together we can try to find solutions. This serves to boost self-esteem and build trust.”

As with Alma, when a coach is able to understand a customer’s situation, they are better able to serve the customer in current and future sessions.
Given the Clinic’s mission to build the financial security of the working poor through our own work in direct services as well as partnering with providers of varied social services, we have decided it is best to use both an outcomes and a well-being approach to financial security in order to fully serve our customers.

Financial coaching programs face the constant challenge of tracking customer outcomes. The Clinic conducts extensive data collection and analysis to measure its programs. However, not every social service organization has the capacity to deliver the depth of financial coaching services the Clinic has to offer. Additional measures, such as introducing insightful short surveys like the FCS or CFPB Financial Well-Being Scale can reduce the burden on the program, and play a significant, positive role in meaningful service delivery.

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