Financial Literacy: How to Help Youth in Foster Care

Foster family of three standing on white background

Household debt in the United States hit a record $14.6 trillion in 2022, shared among 340 million Americans. Business and consumer bankruptcies surged in 2023, with several key factors contributing to personal bankruptcies. Overspending and mortgages account for two of the top five reasons people become financially underwater.

Getting into debt is an unnecessary norm for some American families. While some factors are less controllable, financial literacy plays a significant role in staying out of debt. Gaining financial literacy can help.

Foster youth must rely on foster parents for financial education and guidance. You may not feel like an expert, but you can help foster kids, especially foster teens, to make smart financial decisions. Teaching important basics is easier than you think.

Young people who understand the essentials of interest rates, credit card debt, savings, and investing can build financial stability. Teaching foster kids about their personal finances is the first step to personal financial success. Learn why becoming financially literate is critical for foster kids to have financial security as young adults.

Foster Kids Need Financial Education 

Financial literacy, simply defined, is to understand and be able to apply financial knowledge. Financial capability includes understanding how to manage your finances, setting a budget, and understanding credit card debt. Moreso, it includes knowledge about investing, understanding credit reports, and long-term impacts, such as retirement planning. 

Children and families who gain these vital skills benefit when they know not to accumulate too much debt. They may also more easily identify suspicious situations and avoid financial fraud. 

In 2021, the Federal Trade Commission (FTC) had almost 6 million fraud reports. Examples of financial fraud include identity theft or fraud related to tax refunds or cashier's checks. 

Getting a quality education can be difficult for foster youth. However, according to the U.S. Department of Education, a good education predicts successful independent adulthood.

Disruptions to home life and school attendance put foster youth at higher risk of dropping out of high school. These young people are much less likely to get higher education than non-foster peers. A high school diploma is a requirement for most jobs that pay a living wage. Foster youth who age out of the system without a support system or a diploma often find themselves homeless.

The child welfare system, especially the foster care system, has not adequately helped foster youth aging out of care. Too many teenagers age out of foster care without a high school diploma. Helping foster kids gain financial literacy will go far toward ensuring they can make good financial decisions.

Money management is a skill we use in everyday life. Though most schools don't teach financial skills, every adult must learn to: 

  • Pay their bills
  • Develop and stick to a budget
  • Get a loan or qualify for credit
  • Write a check
  • Complete personal taxes
  • Plan or save money for emergencies
  • Choose a banking institution
  • Set up a checking and/or savings accounts
  • Understand fiscal terms, such as APR (annual percentage rate), FICA, assets, and equity

Young people can find themselves in financial debt or more serious trouble without basic financial literacy. Life skills, like checking credit scores or filing taxes, are vital for adults to acquire. 

Here are tips on steps you, as a foster parent, can take to teach financial literacy to youth in foster care. 

Give the Gift of Books 

Foster parents have a variety of options and methods to teach foster kids and teens the value of money. Giving a set allowance can teach kids about working to earn money. It can also teach kids how to budget and save money for a specific purchase. Not all foster parents will guide their children over a long period or feel comfortable without teaching aids. 

Look for books that teach finance to kids. A number of options are available geared toward an audience ranging from young children to teenagers. 

Gamify or Use Financial Ed Programs

Financial educational programs can help teach your kids financial skills ranging from saving and borrowing to planning and investing. 

One example is the FDIC's Money Smart Financial Education Program. You and your foster child can learn together in the program. Developed for people of all ages, it teaches valuable tips about how to make your money go further and work for you. Other FDIC website resources include:

  • Interactive games
  • Financial guides and programs
  • Money management tips 

Games are a great option for kids who aren't otherwise interested in financial literacy. Interactive games can make learning more fun. Consider games about how to pay bills or file federal and state taxes. Games can also teach how to fill out income forms and make sense of pay periods or other money-related topics.

The FDIC and other financial websites also have new facts and tips for many parents!

One final program resource is free online financial classes. These courses teach people to make smarter spending decisions, improve management skills, and develop strong financial know-how. 

Listen to Financial Podcasts

Browse the many financial podcasts and start with a free one. You can find money management and financial literacy podcasts on Spotify, Apple Music, or your favorite app. Some podcasts discuss basics for beginners, while others tackle advanced financial and investment topics. 

Listen to episodes before taking your foster kids to school, or cue a few up to listen on the way to appointments or events. You and your foster youth can listen and learn together during travel or wait time.  

Subscribe to related financial topics, like the economy, investing, or the latest in crypto-currency. Listen together when you find a money-related topic that you and your foster kid both enjoy. 

Get Free Library Resources

Your local library branch has a wealth of financial content in books, audiobooks, magazines, DVDs, and other mediums. For those on a tight budget, using the library is a free way to learn without any limitations. Get a library card for free; then teach your kids the importance and joy of reading and how to find any book they desire. 

Bonus: Kids learn about responsibility when they check out library books, DVDs, and resources. They're responsible for returning books on time in the same condition or will have to pay a fee.

Libraries typically post a calendar of educational programs that are free to the public. Check their events calendar or talk to your librarian about upcoming youth financial programming. 

The Consumer Financial Protection Bureau (CFPB) works with libraries to provide financial ed. They seek to help children and families discover financial education tools. Webinars, publications, and other online resources are available. 

Financial Literacy for Foster Youth

The U.S. Department of Education supports teaching financial literacy in schools. Advocacy groups are working successfully on this goal. However, parents or outside sources can fill the current gap and help kids develop good money habits.

Understanding the importance of financial literacy is essential for foster parents to help youth in foster care. The teaching tips and ideas will help guide your foster child or teen about the value of managing their money. 

Ready to become a foster parent? Take the first step by contacting a child-placing agency near you.