Cortney Jones kept her cash safe in the Texas foster care system by marking it with a pen. Once, when a foster sibling stole her earnings from working odd retail jobs, her proctor parent was able to track the money down to a local Dairy Queen.
It's not that Jones wanted to keep her wages in cash. She really had no other choice. She had gone from bank to bank asking for a safe place to keep her money during the 10 years she spent at 25 different placements in the Texas Department of Family and Protective Services. But each time, a teller told her she needed a parent to help her set it up and identification documents like photo IDs and a birth certificate.
Even if she had a bank account, Jones' only experience learning about personal finances was from a single financial literacy session she attended in state care. After a customer mocked her for miscounting change at a cash register, she started thinking she wasn't cut out for a job, either.
Jones graduated high school and exited the foster care system at 18 years old. She immediately became homeless.
"I was so far behind the curve. It was extremely hard for me to budget, to save," Jones said. "You need a bank account for everything."
With time, Jones, who is now 38, managed to get on the right track. She earned two degrees in social work and founded Change 1, a nonprofit to support young adults exiting the foster care system.
But her early struggles with securing a bank account and gaining financial knowledge are common. Without a parent to open a bank account or coach them in basic financial literacy skills, some 20,000 young adults exit the foster care system without a safety net every year, according to the Adoption and Foster Care Analysis Reporting system's more recent decade of published data, which goes up to 2021.
While most young adults have families to support them well into their 20s, foster youth who have not found permanent placement enter adulthood alone. A fifth of them instantly become homeless, half achieve gainful employment by the age of 24 and under 3% ever earn a college degree, according to estimates from the National Foster Youth Institute.
Banking access and financial literacy are among the biggest stumbling blocks for young adults exiting the child welfare system to navigate, foster youth and advocates said. Banks typically require a guardian to open and administer an account for a minor and ask for identification documents, such as a birth certificate, that a young person in state care may not have access to.
Meanwhile, few foster children receive the financial education and assistance that other young people may get from loved ones and mentors. They often enter adulthood lacking a co-signer for a credit card, loan or lease for a first apartment.
"This isn't something that has nationwide traction or attention," said Javier Janik, program manager for economic opportunity and investment at the nonprofit Neighborhood Allies, which has worked on efforts to extend banking access to former foster youth in Allegheny County, Pennsylvania. "The scope of work is pretty limited."
A daunting challenge
Across the board, advocates for foster youth said a dearth of access and training around money matters is setting some of the most vulnerable groups back. Without a guardian, foster youth often scramble to find work and gain the resources and experiences they need to save and learn basic financial literacy skills. When they age out of the system between 18 and 21 — the oldest a person is federally allowed to remain in the system — they have the odds stacked against them.
What little research on banking rates among former foster youth exists shows that they have less access to financial products than the general population. Only about 52% of former foster youth in three Midwestern states had checking or savings accounts in 2007, compared to 81% of the general population in the same age group, according to the largest existing study into banking rates among foster youth.
A smaller but more recent 2021 survey conducted in an unnamed urban community in the Northeastern U.S. found that 72% of the 39 surveyed young adults still in care had a checking or savings account, though few had credit cards and over half of the respondents had less than $500 in savings.
Other studies have found that foster youth are less likely to trust mainstream financial products, lack supportive adults to help them understand finances and are more likely to have their identities stolen, experience credit problems and rely on risky lenders.
Bank account access and a driver's license — both of which typically require a parental signature — are the two most pressing resources foster youth said they needed help accessing, according to Sarah Crockett, director of public policy at Texas CASA, a nonprofit agency that helps in welfare cases.
"That's what we have heard from foster youth," Crockett said. "Those are the things they don't have access to that they need."
Without a bank account, foster youth struggle to save wages they earn from jobs that could help support them once they age out of the system. Many foster youth, especially groups more likely to age out of the system, frequently move placements, making it hard to keep track of cash.
"If you don't have a bank account, there's not a good way to get paid," said Kate Murphy, director of child protection policy at the nonprofit Texans Care for Children. "A lot of older youth, in particular, are highly mobile. They're bouncing around from placement to placement."
Crockett recalls working with a young person who had managed to find a job and was paid by check but didn't have an adult co-signer to open a bank account. That made it hard for them to cash the checks. When they lost three months of pay, the child decided it wasn't worth working anymore.
"That's the kind of thing that we see a lot," Crockett said.
Those who exit the foster care system after 18 also usually need a co-signer to get a credit card or secure a loan or help them avoid making financial slip-ups. Often, a lack of one rules out the others. For instance, many landlords conduct credit checks to review prospective tenancy applications. If a foster youth hasn't been able to establish a credit history through obtaining a credit card or other means, it can make it tough to secure housing. That makes financial access a big contributor to homelessness among foster youth, Crockett said.
Adults often take advantage of foster youth who do have accounts opened for them. Those in state care are more prone to fraud and exploitation than other groups, a problem heightened by how many people have access to their confidential information. Five percent of minors had credit reports with signs of error or fraud, while another 12% had erroneous records linked to their Social Security numbers, according to findings from one California-based study.
Anecdotal accounts support that data. When Janik, the program manager for Neighborhood Allies, worked on an effort to open bank accounts for former foster youth between the ages of 18 and 24 in Allegheny County, he found that roughly 20% of the some 100 participants had financial histories that prevented them from establishing a relationship with a bank. Many of the young adults did not even know they had accounts opened under their name or said they had been managed by a foster parent without their knowledge.
"In a very broad sense, children are taken advantage of," Janik said. "In the foster care system, that is way more common than the general population."
Foster youth also have few resources to learn how to become more financially aware. Most young people learn to manage their money and address risks — including overdraft fees, bad credit, fraud and investment choices — from families and other mentors.
Only about 34% of state care facilities provided budgeting and financial management services in 2022, a 3% decline from 2018, with several states providing none, according to the National Youth in Transition Database. It doesn't help that many social workers are not well trained in finances themselves, added Clark M. Peters, an associate professor at the University of Missouri who studies the foster system.
"No one's paying attention to an interest rate until they have money in their pocket and want to do something with it," Peters said. "That's true for anyone, but it's especially hard for those who haven't had any exposure."
Once they are denied account access, foster youth become more likely to turn to higher risk forms of money management, like prepaid cards and risky lenders, said Denise Rogers, a supervisor at Little Flower Children and Family Services of New York, which has been working to extend financial education to foster youth populations there.
"It's still an uphill climb," she said. "All of that stuff might pop as you go into your young adulthood. It can have a long-term, lasting effect."
When Brayden Boyce, a 19-year-old Oregon-based former foster youth, first opened a Wells Fargo account with a proctor parent at the age of 17, he recalls fumbling with his card at a bodega to make his first purchase: a Snickers bar.
"I didn't know jack anything," he said.
Eventually, with real-time experience and help from some mentors — and that bodega cashier — he started to get banking down.
"It felt like I could just be free," Boyce said. "It was one of the best feelings I ever had. It's very important to us, as well as our money. It's how we make our choices."
What's holding banks back
Few laws prevent financial institutions from opening sole-ownership accounts — an account for someone under the age of 18 without an adult also on it — for minors. But banks and credit unions often don't know what legal considerations factor into opening these types of accounts for minors. Interagency guidance released in 2016 outlines the regulatory requirements for opening these accounts. In essence, financial institutions need to obtain a name, birth date, address and Social Security number for the minor, according to the Federal Deposit Insurance Corp. and the National Credit Union Administration.
Additionally, no state law prohibits a bank from opening an account for a minor on their own, according to a 2016 Conference of State Bank Supervisors survey, though financial institutions should consult with their state regulators and legal counsel regarding the issue, the FDIC said.
Even if a bank or credit union does understand the legal requirements, they may intentionally decide not to bank foster youth since they don't see a strong return for the risk they are undertaking. In most states, minors cannot be held responsible for losses they incur on an account. Before a customer turns 18, they can void financial contracts, meaning the bank would be on the hook for any losses tied to the account.
In some instances, minors who have legally been deemed adults can enter into enforceable contracts, but this can vary by state. And since a young person may move to a state where the laws are different, federally chartered banks may avoid opening minor-only accounts, said Carly Urban, a professor of economics at Montana State University.
There can also be a hefty investment to create specialized accounts with additional safeguards on spending limits and other mechanisms that protect minors from making poor financial decisions and building positive spending habits. Capitol Credit Union in Austin, Texas, has worked with its state Legislature on a pilot program to offer accounts to youth in foster care. But building guardrails into accounts that protect this vulnerable group meant working with $202 million-asset Capitol's core technology systems.
"If it was profitable, everybody would be doing it, and we wouldn't be having this conversation," said Pierre Cardenas, CEO at Capitol Credit Union. "This isn't put in the microwave, it's going to be ready in a minute. It's a long-term play."
A group in Texas that has tried to get financial institutions on board with a banking pilot program for foster youth has run into these issues. Few bankers they spoke to about opening accounts for foster youth knew that they could even open sole-ownership accounts for minors, said Texans Care for Children's Murphy, who helped spearhead the project.
"Even though that's technically the law here, it's not most banks' policy," she added. Smaller financial institutions have piloted programs to open accounts for foster youth as young as 12. The Cities for Financial Empowerment Fund, which works with local partners to improve financial stability for the unbanked and underbanked, has offered specialized sole-ownership accounts without overdraft fees in partnership with 50 financial institutions, including two focused on former foster youth. In one of the projects in Milwaukee, Wisconsin, a credit union also created its own specialized accounts for foster youth under the age of 18.
But for the most part, these efforts have focused on young adults — not those under the age of 18.
A lack of communication between bankers, lawyers, social workers and the many disparate industries that have a stake in the issue might be fueling the misunderstanding, said Peters, the University of Missouri professor.
"This is a multifaceted problem, which brings up several professions that don't normally talk to each other," Peters added. "Few social workers read American Banker. Few bankers read social work journals."
The Lone Star State leads the way
On a routine visit to a shelter in Houston, Martin Martinez, a senior policy analyst at Texas Appleseed, a nonprofit focused on preventing homelessness, overheard two young people discussing a banking issue. One had received a check and was trying to figure out how to cash it. They ended up asking others in the shelter if any of them had a Venmo or bank account they could borrow. Both of the young people had been in foster care, Martinez later learned, and the conversation stayed with him.
"I was thinking, 'There should be an easier way for this,'" Martinez said. "They shouldn't have to go through all these roundabout ways to safely access their money."
Advocates in Texas have been working on the issue for a number of years. For instance, Texans Care for Children has promoted different initiatives to address the challenge, including a savings account-based outreach project, and proposing a 2019 bill that would have piloted a foster youth banking project. But all of the efforts lost traction.
That is until recently. Earlier this year, the Texas Legislature passed a series of bills meant to improve the conditions of its foster care system. Among them was a bill that called for the Department of Family and Protective Services to pilot a program with local financial institutions to provide foster youth between the ages of 14 and 21 with bank account access.
Jones, the former foster care youth who had trouble getting a bank account, testified in support of the bill while it was being debated. It ended up passing both the state House and Senate with bipartisan support and was signed by Texas Gov. Greg Abbott in May.
"We're creating pilot projects like this to give them a fair shot at life," Jones said. "I just hope that in the darkest times, people understand that people care about them."
State Rep. John Lujan was the bill's lead sponsor in the House and had a personal interest in the legislation. He has adopted three boys who had been in foster care after serving as their court-appointed special advocate. He didn't know how his sons would have managed their own finances if he hadn't been around to help teach them.
"I can't imagine if they didn't have that," said Lujan.
Sen. Tan Parker, who was the bill's author, and Lujan, along with their nonprofit partners and respective teams, consulted with the Department of Family and Protective Services and financial institutions to imagine how they could help address the issue.
"The reality is that there really are no other examples that we're aware of," Parker said. "We were really in uncharted territory."
The legislators found a willing partner for the pilot in Capitol Credit Union, which had already been working on a similar project to reach foster youth in its home city of Austin.
The institution's CEO, Cardenas, had previously been inspired to find a way to help after speaking to foster youth about their banking needs at a local event a few years ago. The pilot program is still in its early stages, but Capitol said it would launch with a small group of foster youth who are given $25 each to start a savings account with a daily cash withdrawal limit of $20.
The project is meant to address two of the most critical issues — access to a bank account and financial literacy. The account is expected to become more flexible for its customers as they get older and demonstrate positive money management habits. For instance, the participants can receive up to $50 after showing six months of good behavior with a more limited account and after they take classes on topics such as budgeting. If after nine months the participants stick with the program and don't have more than three financial mishaps, they will receive $100 and have access to limited overdraft protection and other aspects of a regular bank account. They will also learn about concepts such as loans, auto purchases and investing.
The pilot has encountered some hurdles that demonstrate how complicated banking for minors who are in state custody can be. For instance, the legislation that created the pilot program explicitly states that these accounts will be solely owned by the foster youth customers to help empower them. But that also means Capitol will not be able to notify the state if the participants are in danger of exceeding balance limitations that could affect the participants' ability to receive Social Security supplemental income payments.
Still, Parker is optimistic that the effort will provide a road map for other institutions to follow in creating their own accounts for foster youth. He expects other banks and credit unions to begin offering this type of service within the next year to 18 months. In two to four years, he plans to introduce legislation that could make the program a statewide requirement.
"I will then go and work to make it the law of the land across the country — state by state," Parker said.
In the meantime, Lujan encouraged financial institutions to launch their own efforts. "They themselves can do it," he said. "Don't wait for a state representative or senator to come up with the ideas."
Advocates are optimistic that the program will demonstrate how financial well-being cuts down on other issues that foster youth aging out of the system routinely face, said Crockett, who works for Texas CASA. "We'll hopefully see a reduction in homelessness and an increase in employment, all the kinds of things that we want to see for all young adults, but we unfortunately don't see incredibly often for kids who aged out of foster care," she said.
Jones hopes that will motivate more bankers and lawmakers to try to reach this vulnerable population.
"Trying to take cash places or trying to tell your sob story to a bank — no kid should have to navigate that on their own," she said. "If kids understand more about finances and savings, then they're not surviving, they're thriving. It'll help save lives."
