The Financial Health Check: Building Behavioral Econ into Financial Coaching

The Asset Building Program released a paper today titled “The Financial Health Check: A Behavioral Approach to Financial Coaching.” The paper, coauthored by Antoinette Schoar, a professor at MIT, and Piyush Tantia, executive director at ideas42, presents the findings of a pilot organized by ideas42 to test the effectiveness of a new way of offering financial coaching called a “Financial Health Check,” or FHC. The new type of financial coaching differs from the traditional form of financial coaching in a number of ways. Perhaps most importantly, FHC attempts to adopt behaviorally informed strategies of simplicity and automation to maximize the utility of coaching time and eliminate key obstacles to successful interventions and increased saving.

The authors describe the experimental design of the trial in great detail, both in the body of the main paper and in a technical appendix. The organizers of the pilot compared the amount of savings of those who received the FHC treatment to a control group of similarly situated individuals who expressed interest in participating in a FHC, but who didn’t participate in FHC sessions. Among the most promising findings of the report is that the treatment group, those who were FHC recipients, had 21 percent more savings on average at the end of the study than those in the control group. The results suggest that the FHC could be an important way to increase savings by embedding behavioral insights into financial coaching sessions in a variety of settings, from the workplace to community organizations to one-on-one private consultations.

To find out more about this innovative approach to financial coaching, you can read the full paper here.