Financial Social Work
- Margaret S. SherradenMargaret S. SherradenUniversity of Missouri, St. Louis
- and Jin HuangJin HuangSaint Louis University
There is increasing interest in financial social work as a way to tackle the challenges that economic inequality and financialization pose for financially vulnerable households. Financial social work has deep historical roots and a potentially broad scope for the social work discipline. Two basic concepts underlie financial social work: financial capability and financial well-being. The financial capability framework is the underlying theory. It links structural and clinical practices of financial social work to the growing body of research on financial capability and asset building. Practice content and strategies of financial social work are mapped in detail in three examples: Child development, intimate partner violence, and problem gambling. An overview of the current status of financial social work in social work education and possible future directions concludes the discussion.
Updated in this version
Article updated to reflect recent research. Bibliography expanded to include current resources.
Financial social work (FSW) is a practice area that promotes individual and family financial capability to improve financial well-being and, ultimately, quality of life (Sherraden, Frey, & Birkenmaier, 2016). The aims of FSW include removing structural barriers and increasing access to sound financial services, asset-building opportunities, household financial policies, and financial education and guidance for low- and moderate-income families (LMI) and vulnerable populations. Its emphasis on structural, social, and institutional determinants of financial well-being is generated from social work’s classic person-in-environment perspective (Kondrat, 2013). This article discusses the historical origins of FSW, reasons for its contemporary importance, its conceptual foundations, the scope of its practice, examples of FSW practice and education, and its future development.
Financial Social Work in Historical Perspective
Social work practice to improve financial well-being has deep historical roots in the profession (Stuart, 2016). When the profession was founded in the Progressive Era, social workers routinely facilitated financial stability in families and collected data to inform social interventions (Addams, 1910; Richmond, 1912). Often working alongside home economists, social workers developed a scientific approach to improving household financial well-being (Goldstein, 2012; Pumphrey & Pumphrey, 1961; Starr, 1896; Stuart, 2013, 2016). Meanwhile, settlement house workers laid the groundwork for New Deal legislation that created fair labor laws, the minimum wage, unemployment insurance, and public assistance (Addams, 1910; Starr, 1896). Social workers had also linked family income maintenance programs to economic growth, and proposed income support approaches, such as family allowances and a negative income tax, to promote financial security (Schorr, 1965, 1966).
By the mid-20th century, however, the push for professionalization led to social work’s adoption of psychological approaches, and away from social and economic interventions (Flexner, 1915; Specht & Courtney, 1995). Social workers also retreated from direct and practical work with families on their household finances, such as budgeting and financial decision making. Gradually, social workers also became less involved in providing direct delivery of social assistance or social insurance benefits (Franklin, 1990; Gibelman & Schervish, 1993; Green, Baskind, Mustian, Reed, & Taylor, 2007).
Economic well-being of families reemerged as a policy concern during the War on Poverty, announced in 1964. This period, however, did not usher in a renewed focus on household finances. Instead the focus was on welfare state expansions to health and social programs and community economic development initiatives. Although many initiatives from the War on Poverty still exist today—including Medicare, Medicaid, Job Corps, and Food Stamps (now the Supplemental Nutrition Assistance Program)—tax cuts and privatization have led to significant reductions in welfare state programs (Abramovitz & Zelnick, 2015; Walz & Groze, 1991).
By the end of the 20th century, as inequality became more pronounced (Alvaredo, Atkinson, Piketty, & Saez, 2013; Piketty & Saez, 2003), concern about the state of family financial well-being accelerated. The social work profession began to rekindle its earlier focus on household finances. Along with traditional approaches such as income supports, innovations in asset building, financial education and guidance, and community economic development sparked new research agendas, policies, and programs (Birkenmaier, Sherraden, & Curley, 2013; Sherraden, 1991; Sherraden & Mason, 2013). This renewed focus on FSW is explored in this article.
Why Financial Social Work Has Gained Importance
The signs were clear for many years, but political and economic discontent in Europe and the United States, in 2016 and 2017, drove home the reality of growing economic inequality. In advanced economies, such as the United States, the income gap between rich and poor reached its greatest level in decades, and wealth inequality became even more pronounced than income inequality (Dabla-Norris, Kochhar, Suphaphiphat, Ricka, & Tsounta, 2015).
Two Trends Associated with the Growing Importance of Financial Social Work
Two trends contributed to this upheaval: Growing income inequality and financialization. These two trends are key contributors to financial vulnerability in U.S. families and households, and highlight the importance of FSW practice to improve financial well-being.
Growing Income Inequality
The first trend, growing income inequality, is associated with two key factors: Stagnant wages in LMI groups and the growing importance of assets in determining household income. Regarding wage stagnation, since the 1980s, average real labor income decreased by 4% for low-wage American workers and rose only 6% for middle-wage workers (Mishel, Gould, & Bivens, 2015). During the same period, the income share of the top 1% of U.S. families increased from about 10% to more than 20% of the total national income (Saez, 2019). Both college- and non-college-educated workers, as well as blue- and white-collar workers were affected by wage stagnation and growing income inequality (Mishel et al., 2015).
Regarding the growing importance of assets in household income, the proportion of income from financial capital (or assets) has increased relative to earned income, leaving those without assets at a significant disadvantage (Cynamon & Fazzari, 2015). In fact, scholars attribute a large part of income inequality to this increased share of asset income and asset inequality (Fräßdorf, Grabka, & Schwarze, 2011; Saez & Zucman, 2016). This trend, observed in both the United States and other countries (Adams, Karabarbounis, & Neiman, 2014), bodes poorly for LMI families because they tend to hold few or no assets and, in significant numbers, hold negative assets (Killewald et al., 2017).
Pace of Financialization
The second trend is the fast pace of financialization. The “financialization of the everyday,” as one analyst frames it, has changed the way people live, the financial opportunities they have, and the financial decisions they must make (van der Zwan, 2014, p. 111). In the 21st century, families require a range of increasingly complex financial instruments—including bank accounts, retirement savings plans, a positive credit report, home mortgages, credit cards, insurance, and others—to live financially secure lives and achieve long-term goals. No longer can families survive on cash alone as they did through much of the 20th century, which places many on the margins of the economic mainstream (Baradaran, 2015; Servon, 2017; Venkatesh, 2006). Financialization also affects how families access social welfare benefits. In what one scholar calls “state-sponsored financialization” (Belfrage, 2008, p. 282), most cash public benefits, such as Social Security and Supplemental Security Income, are delivered electronically through direct deposit (U.S. Social Security Administration, n. d.). Increased reliance on the financial system requires that families have financial knowledge and skills to manage various products and technologies and access to beneficial products and services.
In addition to affecting daily family financial management, financialization has altered social policies in ways that contribute to inequality. In the past, nearly all social welfare benefits were delivered through direct government expenditures, especially Social Security, Medicare, and Medicaid. Today, however, a growing proportion of social welfare dollars are spent through the tax system (e.g., tax subsidies for retirement, housing, and health) (McCabe, 2015). These tax expenditures are often distributed through specific financial products and services (e.g., insurance products, retirement savings accounts, health savings accounts). Vulnerable populations are often excluded from accessing these financial services. The growth of tax expenditures thus contributes to inequality because they tend to be regressive, benefiting wealthier households more than poorer ones (Levin, Greer, & Rademacher, 2014; Sherraden, 2014). The exceptions are tax expenditures that explicitly target LMI families (e.g., the Earned Income and Child Tax Credits), but these are dwarfed in magnitude compared to those that benefit the wealthy (Tax Policy Center, 2017).
Status of Financial Capability and Well-Being in Vulnerable Populations
These two trends have resulted in growing financial vulnerability, as large numbers of people face challenges in achieving financial capability. In the United States, only a third of Americans correctly answered at least four of five basic financial knowledge questions (Lin et al., 2016). This indicates that many American families may lack sufficient knowledge and skills to optimally manage money, use credit, acquire assets, choose insurance, pay taxes, save for emergencies, and plan for long-term financial security and development (Lusardi, 2011).
At the same time, financially vulnerable families lack access to affordable bank and investment accounts, insurance, and other beneficial products. For example, in 2017, about one-fourth of low-income American households did not have a checking or saving account, and nearly another fourth had a bank account but also used costly and sometimes unsafe alternative financial services (Apaam et al., 2018). Nearly 30% of people living in low-income neighborhoods lacked a credit record, and an additional 15% had unscored credit records, making it difficult to borrow, rent an apartment, or get a job (CFPB, 2016).
Racial and ethnic minorities are affected most deeply. In a 2015 survey, more than 40% of black and Hispanic respondents reported that they were late with student loan payments (FINRA, 2016). In large metropolitan areas with higher poverty rates and concentrations of racial minorities, there are fewer mainstream financial services providers compared to alternative financial service providers (Despard & Friedline, 2017). While lack of access to financial services is usually measured at the individual level, this pattern reflects historical, societal, and market constraints on financially vulnerable populations and underscores the importance of structural changes to address the root causes.
Lacking sufficient access to mainstream financial services, financially vulnerable families are targeted by alternative financial services providers offering subprime loans, check cashing, money orders, money transfer services, payday loans, auto title loans, pawnshop loans, and others (Apaam et al., 2018). These products are accessible but they are often more expensive, and sometimes risky. The poor pay more to borrow money, including the 12 million people who borrow using a payday loan and pay an estimated $9 billion in fees each year, and another 2.5 million people who borrow using auto title loans and pay an estimated $3 billion in annual fees (Pew Charitable Trusts, 2016). Four out of ten black and Hispanic respondents reported borrowing from pawn shops, payday lenders, auto title lenders, and rent-to-own stores (FINRA, 2016).
Moreover, financially vulnerable populations, especially racial and ethnic minorities, lack access to asset-building policies (Sherraden, 2014). Retirement savings, such as 401(k), 403(b), IRAs, and Roth IRAs provide a stark example of differential access to asset building policies. It is estimated that these types of retirement savings account for more than half of total retirement assets ($15 trillion of the $25 trillion total) in the United States (Investment Company Institute, 2017). Contributors to these plans received nearly $190 billion in tax benefits (Asante-Muhammed, Collins, Hoxie, & Nieves, 2016; Rosenthal, 2017). Financially vulnerable households receive almost none of these benefits. Nearly half (45%) of working-age households do not own any assets in retirement accounts (Rhee, 2013), partly because only 52% of private sector employees had access to workplace retirement benefits and partly because vulnerable populations are less likely to benefit from tax advantages of these plans. In 2013, less than half of black families and only one-quarter of Hispanic families owned retirement savings accounts, substantively lower than that of white families (61%) (Morrissey, 2016). Moreover, among those with accounts, the mean assets in retirement savings accounts for whites ($73,000) were about 330% of that for blacks and Hispanics ($22,000) (Morrissey, 2016).
Similarly, the poor and ethnic and racial minorities hold less home ownership wealth. Racial discrimination by the private and public sectors in mortgage lending and in tax subsidies have shaped home ownership rates and the benefits that accrue to household balance sheets. For example, racial minorities pay more for home loans than whites (Bayer, Ferreira, & Ross, 2018; Rothstein, 2018). After the economic crisis of 2008, the narrowing in the gap in homeownership between blacks and whites reversed. In 2017, the gap was 29%, substantially larger than in 1983 when the gap was 24% (Joint Center for Housing Studies of Harvard University, 2018). Although homeownership rates have risen somewhat for Hispanics and Asians, the difference from white rates is still very high (Joint Center for Housing Studies of Harvard University, 2018). Lower homeownership rates mean that low income families overall receive much less of the home mortgage tax deduction than do wealthy families both in total amount and as a share of their incomes (Urban Institute, 2017). Furthermore, racist policies that shaped racial segregation (Rothstein, 2018) also have contributed to lower appreciation of housing assets in minority households.
Various indicators suggest that large segments of the population lack financial well-being. Since the 2007 financial crisis, for example, the income poverty rate increased and remained around 15%, until 2015 when it began slowly to decrease (U.S. Census Bureau, 2016a). More than 40% of families were liquid asset poor, meaning they did not have cash at hand or assets they could easily convert to cash that could sustain them at a poverty level for three months, and nearly 40% could not cover a $400 emergency expense (Board of Governors of the Federal Reserve System, 2019). These figures are worse for racial minorities: Compared to white families, those of color are 2.1 times more likely to live in income poverty and 1.7 times more likely to not have liquid savings (Prosperity Now, 2016).
Low financial capability contributes to other types of vulnerability. Almost 13% of households reported food insecurity at least once during in 2015 (USDA, 2016). Despite improvements due to the Affordable Care Act, nearly one in ten people (9%) were uninsured in 2015 and 2016 (Cohen, Zammitti, & Martinez, 2017; U.S. Census Bureau, 2016b), and about one fifth of the population had overdue medical bills (FINRA, 2016).
Low financial capability is also highly associated with a variety of nonfinancial outcomes. Research suggests that financial hardships are associated with psychological stress (American Psychological Association, 2015; Deaton, 2011), anxiety and depression (Brown, 2012; Libman, Fields, & Saegert, 2012), lead to physical health concerns (Drentea & Lavrakas, 2000), negatively affect social and family relationships (Pleasance, Buck, Balmer, & Williams, 2007), and create barriers for human development (Taylor, Jenkins, & Sacker, 2009). These negative effects intensify when hardship continues over time and in contexts of high economic inequality (Kahn & Pearlin, 2006). In social terms, feeling poor—and perhaps “being made to feel poor” by living in a society with high economic inequality—contributes to poor social, emotional, and health outcomes (Sapolsky, 2005, p. 98).
Two Key Concepts: Financial Well-Being and Financial Capability
Two concepts underlie FSW. The first is financial well-being, a broad goal of FSW. The second is financial capability, a concept that builds on social work’s principle of person-in-environment, which informs social work’s approach to improving financial well-being.
The purpose of FSW is to enable families to achieve financial well-being. Despite widespread use in multiple disciplines and professions—including social work, public policy, consumer finance, and financial counseling—the definition of financial well-being remains vague (CFPB, 2015). It is often used interchangeably with economic well-being, material well-being, financial health, financial wellness, financial satisfaction, and other terms (Joo, 2008). According to one general definition, financial well-being is “a state of being financially healthy, happy, and free from worry” (Joo, 2008, p. 21). It is considered a subdomain of well-being (Zimmerman, 1995) and relates to and affects other aspects of general well-being, such as health and mental health, marriage and family, and job and career.
Defining financial well-being is difficult because it is a multidimensional concept. For example, the CFPB (2015) defines financial well-being as a four-part construct: (a) having control over day-to-day and month-to-month finances, (b) having the financial freedom to make choices that allow enjoyment of life, (c) having the capacity to absorb a financial shock, and (d) being on track to meet financial goals. This definition incorporates an individual’s financial situation and actions.
In this article, we focus on two aspects of financial well-being—stability and development. Financial stability refers to the functions of making daily financial choices, meeting ongoing obligations, and absorbing short-term shocks. Financial development refers to the functions of maintaining long-lasting financial security and achieving long-range goals. To achieve financial stability and development, individuals and families must generate income, save and build assets, manage consumption and credit, and be protected from shocks (U.S. Department of the Treasury, 2010). The concept of financial well-being (Fig.1) includes each of these elements. These can be considered objective measures of financial well-being, and FSW practice aims to address each dimension, function, and element of financial well-being. Each of these elements is critical but insufficient by itself to achieve family financial well-being. Ideally, individuals and families need to have all of them for financial stability and development. For example, one recent report suggests that low consumption alone cannot reduce financial vulnerability among minorities (Traub, Sullivan, Meschede, & Shapiro, 2017).
In social work, financial capability has been defined using a capabilities approach (Johnson & Sherraden, 2007; Sherraden, 2013). Capabilities, according to philosopher Amartya Sen (1985, 1993), are people’s real freedom to achieve a range of important functionings, or what they are actually able to be and do. In other words, in financial capability, functionings have to do with achieving financial well-being. What makes it possible to achieve these functionings is an interaction of an individual’s ability to act, along with the opportunity to act (Sherraden, 2017).
According to the capabilities approach, financial capability (indicated by the dashed box in Fig.2) is built on a foundation of (a) access to beneficial financial products, services, and policies (i.e., financial inclusion) that provide the opportunity to act, and (c) financial knowledge and skills that provide the ability to act (i.e., financial knowledge and skills). In combination, these lead to financial functionings that make it possible to manage a financial life and achieve financial goals (e.g., income generation, asset building, consumption and credit management, protection). Thus, the framework of financial capability (Fig.2) accommodates the concept of financial well-being described in Figure 1.
* Notes: Terms in italics refer to key concepts in the capabilities approach. The figure parallels Sen’s capability framework.
Financial capability in social work is theoretically distinct from its common use, which focuses on individual financial behaviors and financial management. In fact, the framework emphasizes that an inclusive financial environment is the precondition that permits individuals to apply their financial knowledge and skills (Huang, Nam, & Sherraden, 2013; Huang, Nam, Sherraden, & Clancy, 2015). Financial inclusion in the framework targets environmental constraints and structural oppression on individuals’ access to beneficial financial products, services, and policies. Without structural and institutional change, especially on financial inclusion, interventions to improve financial knowledge and skills may have limited potential for promoting financial capability. In this regard, financial capability is not a behavioral concept but a developmental idea (Midgley, 1999) that expands people’s options and life chances.
As suggested by Nussbaum’s “combined capabilities” (2000, p. 85), impacts of financial knowledge and skills on financial well-being are not additive, but interactive. Each element is not only essential to financial capability; they also affect one another in ways that are also essential to financial capability. In other words, the combination of the two is greater than the sum of the separate effects of financial knowledge and skills and financial inclusion. Finally, capability has implications for voice and influence in institutional change. People who are engaged in defining capabilities and may be more likely to challenge injustices through individual and collective action (Sherraden, 2013). In Figure 2, the interactive dynamics is reflected in one combined arrow, rather than two separate arrows to financial well-being.
In summary, these two key concepts define the scope and approaches of FSW. They underpin FSW theory and practice.
The Scope of Financial Social Work Practice
Social work’s core constituents tend to be financially vulnerable, such as people with low incomes, those in poor health, those living with disabilities, and targets of discrimination, oppression, and violence. Promoting financial stability and financial development is not only an end in itself, but also is a means to enable clients to cope with a range of other challenges, such as mental illness, transition from foster care to adulthood, living as a transgendered person, caring for an older relative, returning to the community after a period of incarceration, or tackling job discrimination.
Given the importance of financial well-being, the scope of FSW practice is broad. The policies and services are illustrated in Table 1—with accompanying examples of practice approaches. These are listed for each of the five elements of financial well-being: Income, assets, consumption, credit, and protection (see Fig.2). Each cell of the table indicates a financial capability strategy that promotes one element of financial life. For example, cell A1 shows examples of how social workers enable clients to maintain and generate income and to increase their access to income support programs, and cell A2 is about how social workers improve financial knowledge and skills related to income maintenance and generation. Though diverse, these approaches are but an incomplete list of FSW practices. There is unlimited potential for FSW innovations to build financial capability and achieve financial well-being.
Table 1. The Scope and Content of Financial Social Work Practice: Examples of Micro to Macro Interventions
Elements of Financial Well-Being
Financial Capability Practice
1. Financial Inclusion Programs
2. Financial Knowledge/Skills Programs
A. Income Maintenance & Income Generation
Facilitate enrollment in income support programs (e.g., TANF and SSI)a
Refer clients to VITA sites for tax assistance
Accommodate banking services in the senior community service employment program
Engage clients to advocate for policy change in raising the minimum wage
Defend welfare state policies
Advocate on behalf of clients for income supports
Provide information on employment benefits in employee financial education programs
Help clients to fill out EITC applications
Train clients to use web-based benefit calculators
Create financial education services integrated in youth employment programs
Enroll clients in job and income support policies
B. Asset Accumulation
Plan the use of assets in Individual Development Accounts for TANF recipients
Apply grants from federal home investments partnerships program for local governments to support home purchase among low-income
Design inclusive Child Development Account policy and evaluate policy impacts
Encourage client participation in policy change
Tackle policy discrimination and design inclusive asset building policies
Provide retirement counseling services to older adults
Identify and contact HUD-approved housing counseling services for clients
Provide financial coaching to small business owners
Refer low-income students to college aid consulting services
Integrate financial education services in asset-building programs, such as IDAs, and CDAs.
C. Consumption Management
Support public in-kind support programs (e.g., nutrition, housing, utility)
Create safe EBTs for public welfare recipients (e.g., TANF and SNAP)
Incorporate the ABLE Accounts for children with disabilities to students’ Individual Education Plans
Work to remove asset limits eligibility for nutrition assistance and other income support programs.
Coach families to create a budget and track spending
Provide budgeting education and planning for children with developmental disabilities
Offer financial counseling to intimate partner violence survivors to evaluate their financial status
Compare low-cost banking service options with unbanked clients
Plan dependent care costs using the dependent care flexible spending account
D. Credit Building
Provide microloan information for small business owners in community economic development programs
Establish partnership between intimate partner violence programs and small dollar loan programs
Propose predatory credit product regulations
Organize a statewide coalition of microcredit/microfinance programs
Conduct financial therapy and debt counseling services to addicted gamblers and affected family members
Train clients to use free credit report and score services
Engage US SBA credit counseling services for women business owners
Facilitate access to micro-insurance for low-income business owners
Explain and coach the process of purchasing health insurance through the Health Insurance Marketplace
Identify and coordinate with lenders on federal foreclosure prevention programs to support low-income homeowners
Provide educational materials on insurance and risk management modules for business owners
Inform clients on government-sponsored car insurance for low-income families
Note. ABLE account = Achieving a Better Life Experience account; CDAs = Child Development Accounts; EBT = Electronic Benefit Transfer; EITC = Earned Income Tax Credit; IDAs Individual Development Account; SNAP = Supplemental Nutrition Assistance Program; TANF = Temporary Assistance for Needy Families; SBA = Small Business Administration; SSI = Supplemental Security Income.
Four observations can be gleaned from the FSW examples in Table 1. First, FSW services occur across micro, mezzo, and macro levels of social work. At the micro level, social workers aim to increase individual financial knowledge and skills and enhance people’s financial behaviors, such as facilitating low-income families’ use of volunteer income tax assistance. At the mezzo level, social workers organize, deliver, advocate for improved access to financial education and programs, such as bringing financial services into schools and social service agencies. At the macro level, social workers oppose discriminatory policies and develop institutional access to financial capability policies and program, such as working to raise the minimum wage or provide access to education savings.
Second, FSW practice addresses the financial needs of individuals and families at different life stages across the lifespan. For example, it supports child care and child development, employment opportunities and college education in young adulthood; health, entrepreneurship, and homeownership in adulthood; and retirement for older adulthood.
Third, FSW practice serves various populations who have been targets of historical and contemporary discrimination in policies and practices, such as racial and ethnic minorities, families with low-incomes, women, individuals with disabilities, and survivors of intimate partner violence. It also serves populations that have been particularly hard hit by financialization such as many of the aforementioned groups and those without access to the internet. It suggests that financial well-being and financial capability are common challenges of different populations throughout the life course (Morrow-Howell & Sherraden, 2015).
Fourth, FSW practice encompasses both strategies of financial capability—financial inclusion and financial knowledge and skills. It may even promote multiple financial well-being elements simultaneously. For example, ABLE accounts for children with disabilities, a policy that is currently being rolled out in various states, which provides a program structure to manage disability-related consumption, encourage asset accumulation, and motivate income-generating employment by exempting asset-limit eligibility from means-tested policies (ABLE National Resource Center, n. d.).
Three Examples of FSW Practice: Relationships with Other Domains of Individual Well-Being
Table 1 provides an overview of major elements of financial well-being and how policies and services contribute to achieving each of the elements. This section demonstrates the financial and nonfinancial outcomes of FSW practice in three areas: Child development, intimate partner violence, and problem gambling.
Asset Building for Children’s Long-Term Development
Owning assets has financial and nonfinancial impacts on child development (Huang, Sherraden, Kim, & Clancy, 2014; Sherraden, 1991, 2014). Assets have direct effects on child development by providing financial resources for future education and other developmental investments. In addition, assets exert indirect influence by shaping child development through effects on parental behavior, parental expectations of the child, maternal mental health, and parental involvement (Orr, 2003; Yeung & Conley, 2008; Zhan & Sherraden, 2003).
However, low-income and racial and ethnic minority families historically have lacked access to policies that build assets (Williams Shanks, 2005; Oliver & Shapiro, 2006). Moreover, since the early years of the republic, Native American, African American, and Hispanic American, as well as other groups, such as Japanese and Chinese Americans, have suffered the impact of asset stripping from discriminatory and oppressive policies and practices (Lui, Robles, Leondar-Wright, Brewer, & Adamson, 2006; Williams Shanks, 2005).
Since the 1990s, social workers have pioneered asset-building policies for low-income and vulnerable populations in the United States and around the world (Loke & Sherraden, 2009; Sherraden, 1991, 2014). One policy example is Child Development Accounts (CDAs), which are savings or investment accounts that provide financial access, information, and incentives to encourage asset building for children’s long-term development (Sherraden, 1991). Ideally, CDAs are lifelong (begin at birth), universal (available to all), and progressive (larger subsidies for the poorest children). Assets accumulated in CDAs—which are subsidized by public, nonprofit, and/or private sources—may be used for education, homeownership, small business, and other developmental purposes.
By providing an automatically opened account with an initial deposit, CDAs can be implemented universally for all children (Nam, Kim, Clancy, Zager, & Sherraden, 2013). A policy experiment testing CDAs finds positive impacts on asset accumulation (Beverly, Clancy, & Sherraden, 2016), and reduced disparity in asset accumulation across socioeconomic status (Huang, Kim, Sherraden, & Clancy, 2014). Other positive effects include improved attitudes and behaviors of parents and children (Huang, Sherraden, Kim, & Clancy, 2014; Huang, Sherraden, & Purnell, 2014; Kim, Sherraden, Huang, & Clancy, 2015).
Informed by this research, macro FSW practice has led to CDA policies in many states. For example, Maine’s Harold Alfond College Challenge opens a CDA with $500 for future college expenses for every baby born in the state. To achieve universal participation, Maine modified the program based in part on FSW research, from voluntary enrollment to automatic enrollment in 2014, and now Maine has the first universal, statewide, at-birth CDA policy in the nation (Clancy & Sherraden, 2014). In addition to Maine, macro FSW practice has contributed to the development of CDA policies in Connecticut, Colorado, Nevada, Rhode Island, Pennsylvania, and Nebraska, as well as in the cities of San Francisco, St. Louis, New York, and Oakland. Some CDA programs include financial education and training to participants and create financial incentives for behavior change, such as children’s improved school performance and parents’ financial preparation for families and children. In other words, CDA programs have become a financial platform that also includes opportunities for other micro social work interventions.
Economic Empowerment for Survivors of Intimate Partner Violence
Intimate partner violence (IPV) programs were among the early adopters of a FSW approach that complements traditional social and legal interventions (Peled & Krigel, 2016; Postmus, 2010; VonDeLinde & Correia, 2005; Sanders & Schnabel, 2006). FSW practice with victims of IPV is built on three observations. First, financially vulnerable women have a higher risk of exposure to abuse than more affluent women due to neighborhood disadvantage and individual financial distress (Tolman & Raphael, 2000; Weaver, Sanders, Campbell, & Schnabel, 2009). For example, female welfare recipients are more likely to report abuse experiences than female non-recipients (Kurz, 1998; Meier, 1997). Second, economic abuse is a distinct form of violence in which victims are deprived of a job, education, access to transportation, a financial identity, and financial products and services, such as credit cards, bank accounts, retirement accounts, or tax refunds (Adams, Sullivan, Bybee, & Greeson, 2008; Postmus, Hetling, & Hoge, 2015; Weaver et al., 2009). Third, and central to social work practice, because victims of IPV are often financially dependent on their abusers and unable to manage financially on their own, they are unprepared economically to leave abusers (Sanders, 2013).
To address the financial aspects of IPV, programs aim to economically empower IPV survivors. Some programs take a financial education approach. In partnership with the National Network to End Domestic Violence, the Allstate Foundation created the Moving Ahead through Financial Management (Silva-Martinez et al., 2016). This five-module training program has been implemented in multiple states to teach survivors of IPV about financial abuse, financial management, credit, budget, and other financial management topics (Postmus et al., 2015). Financial education improves self-reported financial knowledge and behavior and decreases perceived financial strain among survivors of IPV (Postmus et al., 2015). So far, however, research has not assessed impacts of financial education on survivors’ long-term economic independence and their relationships with abusers.
Other programs take a structural approach, aiming to change financial institution policies and procedures, and financial services regulations (Boyce, Koliner, Koplin, Trifone, & Wong, 2014) that inadvertently place barriers on IPV survivors. In other words, improving financial knowledge and skills are insufficient when financial opportunities are limited by structural obstacles (Peled & Krigel, 2016). Social workers can work with financial providers and regulators to remove barriers—such as requirements for identity verification to open a bank account—that make it possible for survivors of IPV to build financial capability.
FSW can combine financial inclusion and financial knowledge and skills to build financial capability for IPV survivors. Among the earliest examples of this approach is Redevelopment Opportunities for Women’s Economic Action Program (REAP), an initiative that emerged from a collaboration of 13 domestic violence and three homeless service agencies in St. Louis, Missouri (Sanders & Schnabel, 2006). The initiative’s three components—financial education and credit counseling, Individual Development Accounts (IDAs), and financial advocacy and guidance—begin to guide IPV survivors on a path towards financial independence from their abusers (Sanders, 2013).
In the area of IPV, financial social workers engage in social work practice using financial education, counseling, coaching, and therapy at the micro level. They initiate and develop financial interventions and programs at the organizational and community, or mezzo, level. Finally, they conduct research and engage in policy practice by informing and advocating for policies that take into account financial development of IPV survivors (Postmus et al., 2015; Sanders, 2013).
Financial Interventions to Address Problem Gambling
Another area where FSW practice has made valuable contributions is with people who have a gambling disorder. Gambling disorders result from complex interactions of biological, behavioral, psychological, social, and financial factors (Korn & Shaffer, 1999). According to the monetary motivation model (Flack & Morris, 2015), the expectation of financial gain is one important motivation of problem gambling and plays an instrumental role in shaping problem gambling behaviors (Korn & Shaffer, 1999). Gambling intensity and excitement change dramatically along with increased monetary value at stake (Wulfert, Franco, Williams, Roland, & Maxson, 2008), and contribute to estimates that approximately 1% of the population suffers from a gambling disorder (Kessler et al., 2008). Problem gambling can contribute to financial problems and even lead to bankruptcy when gamblers borrow to gamble and are unable to pay their bills and debts (Gerstein et al., 1999; Grant, Schreiber, Odlaug, & Kim 2010).
Financial social work practice can address these complex dynamics. Effective treatments for gambling addictions use financial services as a complementary treatment element (Shaffer & Korn, 2002). They include an assessment of the gambler’s financial circumstances (Shaffer & Korn, 2002), along with financial counseling, coaching, and therapy that teaches clients about the relationship between finances and gambling, and helps clients create a financial action plan (National Endowment for Financial Education & National Council on Problem Gambling, 2000a). Successful financial counseling involves both gamblers and their family members, especially those affected by gambling debt (National Endowment for Financial Education & National Council on Problem Gambling, 2000b).
Recent developments in financial therapy further integrate financial and clinical practice as a core treatment for gambling disorders (Klontz, Britt, & Archuleta, 2014). Financial therapy aims to integrate cognitive, emotional, behavioral, relational, and economic factors to promote financial well-being, as well as other domains of well-being (Archuleta et al., 2012; Financial Therapy Association, 2014). From the perspective of financial therapy, problem gambling is a type of money disorder, defined as “persistent, predictable, often rigid, patterns of self-destructive financial behaviors that cause significant stress, anxiety, emotional distress, and impairment in major areas of one’s life” (Klontz & Klontz, 2009, p. 129).
In this regard, treating a financial pathology like problem gambling can be integrated into mental health interventions, such as cognitive-behavioral therapy. For example, financial social workers might use discussion of a person’s money scripts—that is, underlying assumptions or beliefs about money developed in childhood—to interpret and treat individual gambling behaviors (Klontz, Britt, Mentzer, & Klontz, 2011). A financial therapist also might explore relationships between gambling addiction and financial flashpoints, that is, early life events such as child abuse and neglect that were precipitated by financial problems (Klontz & Britt, 2012). In these ways, financial social workers apply cognitive-behavioral therapy techniques in financial counseling to address gamblers’ irrational beliefs about money.
In addition to clinical and behavioral interventions for problem gambling, however, FSW practice also includes policy and program change. Despite arguments that lotteries and casinos generate tax revenues and provide employment, there are significant costs to society with gaming, including increased crime, lower work productivity, and spending on gambling treatment and other social programs (Grinols, 2004). Even though the costs of gambling are high, large profits from gambling (Russ, 2018) suggest that regulation will be difficult A comprehensive approach to address problem gambling should include public awareness and education about the risks of gambling, opportunities to exclude oneself from gambling, consumer protections against harmful gambling and possible prohibitions, and more research. Even small changes may make a difference. For example, Massachusetts requires that ATMs be located in hallways at least 15 feet from rooms with slot machines and table games, and prohibits credit card cash advances on the ATMs in casinos and slot parlors (Murphy, 2015).
Financial Social Work Education
Social workers serve millions of financially vulnerable people and must be equipped to enable clients to build financial capability, achieve financial well-being, and ultimately improve their quality of life (Coyle, 2016; Laurio, 2016). They also must be prepared to develop programs and policies that oppose discrimination and expand financial inclusion, education, and guidance to financially vulnerable populations.
Financial social work has attracted the attention of social work students (Loke, Birkenmaier, & Hageman, 2016). When offered an opportunity to learn more, social work students respond with interest (Sherraden, Laux, & Kaufman, 2007). There is evidence that practitioners are gaining interest in FSW training and education (Center for Financial Social Work, n. d.; Despard & Chowa, 2010) and are able to apply what they have learned from FSW education and trainings to improve the financial lives of their clients (Despard & Chowa, 2013). Furthermore, faculty express interest (Gates, Koza, & Akabas, 2016), and those who have been trained in FSW report greater appreciation and confidence in teaching this content, and believe students gain understanding as a result (Sherraden, Birkenmaier, Rochelle, & McClendon, 2017). In interviews, 30 social work faculty in programs across the United States report substantial interest in expanding access to FSW content, although they also caution that FSW content should be culturally competent, and its addition should take into account an already crowded curriculum (Hageman, Sherraden, Birkenmaier, & Loke, 2017). Overall, FSW content in social work programs is uneven; some programs offer little in the way of economic content, while some offer specialized courses (Gates et al., 2016).
Educators are expanding FSW content in social work education by introducing it within existing courses, as separate courses, and through extracurricular and continuing education (Frey, Sherraden et al., 2017; Frey, Svoboda, Sander, Osteen, Callahan, & Elkinson, 2015; Sherraden et al., 2007, 2017). Meanwhile, social work faculty are developing curricula and organizing faculty interested in FSW (Birkenmaier, Kennedy, Kunz, Sander, & Horwitz, 2013). Curricula for FSW have been developed and tested in universities across the country (Frey, Sherraden, Birkenmaier, & Callahan, 2017). An FSW curriculum was tested and refined in 11 minority-serving colleges and universities as well as other social work programs (Sherraden et al., 2017). A textbook on financial capability and asset building in vulnerable populations, based in large part on this demonstration, is available (Sherraden, Birkenmaier, & Collins, 2018). In New York City, a consortium of seven schools of social work successfully offers an FSW curriculum for working with financially at-risk populations (Horwitz & Briar-Lawson, 2017). In Maryland, a Financial Stability Pathway (FSP) project prepares professional social workers with knowledge, attitudes, and skills to assess and respond to clients’ financial problems (Frey, Hopkins, Osteen, Callahan, Hageman, & Ko, 2016). FSW education has been infused in existing courses, practicum placements, and service learning projects (Doran & Bagdasaryan, 2018). Finally, field practicums offer another avenue for teaching about FSW. For example, in one university, students apply classroom learning about FSW with vulnerable clients and communities (Doran & Avery, 2016).
To support these efforts, the Council on Social Work Education (the accrediting body for schools and programs in social work) has created an Economic Well-Being Curricular Guide and a website that offers teaching resources and guidance for linking social work education competencies and behaviors with FSW practices (Council on Social Work Education, 2017).
Future Development of Financial Social Work
This review of FSW suggests several future directions. Regarding theory, it is important to develop a unified theoretical model for FSW practice. This article adopts a theoretical framework (see Fig.2) of financial capability and financial well-being. However, more theoretical and empirical research on specific FSW approaches, interventions, and practices is required. Once available, this body of evidence can be organized systematically in a framework of financial capability and financial well-being, providing more efficient and effective guidance for FSW practice and social work education.
There also is much more to be learned about the links between financial and nonfinancial issues. This essay takes up three examples (CDAs, intimate partner violence, and problem gambling), but there are many other areas where exploring the linkages between financial and nonfinancial issues could be productive, such as child development, health, and disability. For example, enabling families to better manage financial aspects of health could facilitate better health care, and alleviate harmful stress. A better understanding of financial and nonfinancial linkages potentially can inform development of much more effective interventions.
The future of FSW will depend on systematic efforts to promote this reemerging practice area in social work, and to create common understandings and consensus in the profession. Transforming FSW into another traditional practice area—such as school social work, medical social work, family social work, and community social work—will depend on theoretical and empirical and practical developments in the field. Recognition from the American Academy of Social Work and Social Welfare, which selected Financial Capability and Asset Building for All and Reducing Extreme Economic Inequality as two of 12 Grand Challenges for Social Work, will help (Lein, Romich, & Sherraden, 2016; Sherraden et al., 2015). The Grand Challenges initiative can be an effective approach for generating social work research and education on financial capability and asset building and for practice development on financial social work (Huang et al., 2018).
Finally, the focus of this article has been on FSW in the United States. There is a great deal of attention to financial capability in vulnerable and underserved populations around the globe (Organization of Economic Cooperation and Development/International Network of Financial Education, 2015; United Nations, 2017). Although social workers have been active in several other countries (Deng, Huang, Jin, & Sherraden, 2014; Goy, 2017; Grinstein-Weiss, Covington, Clancy & Sherraden, 2016; Guo, Huang, Zou, Sherraden, 2008; Kagotho, Nabunya, Ssewamala, Mwangi, & Njenga, 2017; Karimli, Ssewamala, & Neilands, 2014; Loke & Sherraden, 2009; Nam & Han, 2010; Rothwell, Khan, & Cherney, 2016), relatively little has been written about the profession’s role in promoting financial capability and financial well-being elsewhere. U.S.-based social workers can collaborate with colleagues in other nations on research, practice, and policy initiatives.
Financial social work can play a key role in guiding the profession’s response to economic inequality and financial instability and insecurity in the 21st century. Just as it was a core concern during the period of rapid industrialization and immigration at the turn the last century, social work has a key role to play in a contemporary and socially just global transformation into the digital age.
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