November 11

Josh Sledge

Not Just Child’s Play: Why the financial services industry can – and should – support children’s well-being

When we traditionally think of the industries that can help promote successful outcomes for children, the financial services industry doesn’t generally make the list. However, financial service providers can actually play an important and constructive role in children’s lives. A new research paper released by the Center for Financial Services Innovation (CFSI) explores the relationship between a family’s financial health and its children’s well-being, illuminating the need and opportunity for financial services to play a greater role in supporting child and family success. Doing so can help providers deepen relationships with customers today and with their children in the future.

The report Leveraging Innovation to Support the Financial Health of LMI Families with Children, uses data from CFSI’s Consumer Financial Health Study and draws information from third-party research to look at how family financial health impacts children in the United States, with a particular focus on low-to-moderate income (LMI) households. This close examination reveals the particular financial challenges faced by LMI families with children, and identifies opportunities for financial services providers to offer solutions.

Stress lies at the core of the relationship between financial health and child well-being. Previous research has shown that stress – in all its forms – can have a negative impact on parenting. Stress can affect how parents interact with their children, how they dispense discipline, and how much time and attention they spend focused on their children’s growth. Consequently, parental stress can impair a child’s cognitive and emotional development, behavior, and academic performance.

Having a high level of financial stress is a defining characteristic of households with poor financial health. Financial health comes about when individuals’ daily systems help them build resilience and pursue opportunities; families that fail to meet this standard are more likely to report experiencing financial stress. Forty percent of financially struggling households surveyed as part of the Consumer Financial Health Study said that their finances caused them significant stress, compared to only 7 percent of financially healthy respondents.

Seven out of eight LMI families with children are struggling financially. LMI families with children are more likely to find themselves living paycheck-to-paycheck, and to have difficulty saving money for their and their children’s futures. Sixty-four percent of LMI households with children have less than $1,000 in non-retirement savings, while 82 percent of non-LMI households with children have more than $1,000 in non-retirement savings. LMI families with children are also less likely to use “mainstream” financial products and services, such as checking and savings accounts. For many LMI families, this means children may grow up without developing savings habits or learning about financial products and services that may be safe and affordable options for them.

While the financial health challenges for LMI families with children are significant, they are not unsolvable, and the financial services community — including financial institutions, nonprofit organizations, and financial technology companies — has an opportunity to play a role. Creating products and services that help LMI families with children improve their financial health can positively impact family and child well-being, while also building and strengthening long-lasting customer relationships — both with parents today and their children in the future.

LMI families’ financial challenges can provide financial services providers with opportunities to help in several ways:

  • Since financial stress can take away time and mental bandwidth that parents could otherwise use to support their children’s growth and development, products and tools that simplify the complicated components of a family’s financial life – such as paying multiple bills with different due dates – can help both parents and kids.
  • Saving can be difficult for LMI families with children, but it is critical to creating financial resilience and ensuring that children can take advantage of future opportunities, such as higher education. Different mechanisms – such as automation or prize-linked savings – can promote saving and create opportunities to help families save at key moments such as tax time.
  • Helping parents demonstrate positive financial behavior can lead to children establishing sound financial habits that can last a lifetime. Providers have an opportunity to participate in programs such as bank-at-school or summer youth workforce development to engage directly with youth and provide safe products and guidance at an early age.

Poor financial health represents a significant hurdle to improving outcomes and well-being for children of LMI families. It’s time for financial services providers to help solve the problem and play a greater role in raising the next generation of Americans.

For more information, download Leveraging Innovation to Support LMI Families with Children and sign up for the supporting webinar on 11/19.




As a Director at CFSI, Josh Sledge manages and advises on initiatives designed to support innovators working on solutions to improve financial health, most notably the Financial Capability Innovation Fund.

financial inclusion, research