Financial Literacy and Social Work

by

Stephen McGarity, Michael Holosko, Porter Jennings

• LAST REVIEWED: 22 February 2018
• LAST MODIFIED: 22 February 2018
• DOI: 10.1093/obo/9780195389678-0264

Introduction

In the second edition of Handbook of Consumer Finance Research, Margaret Sherraden, Jodi Jacobson Frey, and Julie Birkenmaier (Sherraden, et al. 2016, cited under Introductory Work) refer to financial literacy as the effective use of financial skills and knowledge to manage financial resources in a way that maximizes lifelong financial security. Resources normally include personal budgets, checking accounts, savings accounts, credit cards, personal loans, simple insurance products, and retirement plans. As explored in Sherraden’s entry on “Financial Capability” in the Encyclopedia of Social Work (Sherraden 2017, cited under Introductory Work), the need for financial literacy among the general population is becoming an increasingly essential function in response to the current trend toward increased financialization globally. As financial institutions and markets continue to increase in size and influence, individuals without financial skills and knowledge to navigate these systems become economically vulnerable. Many academic fields, including accounting, economics, and public policy, have focused on financial literacy as an intervention for poverty. The field of social work, however, offers a unique contribution to this subject area by positioning financial literacy within the larger system of financial capability. In “Financial Capability and Asset Building for All” (Sherraden, et al. 2015, cited under Introductory Work), Sherraden and colleagues define financial capability as the combined effects of financial literacy (i.e., the ability) with financial inclusion (i.e., the opportunity). Increasing both financial ability and opportunity is needed to increase one’s financial well-being. Currently, work related to financial social work takes many forms. Direct practitioners often help assess the financial well-being of clients, teach clients financial skills, help enroll participants into asset-building programs, and assist individuals to create spending plans. Complementing our micropractice work, mezzo and macro social workers promote high-quality community financial services, push for increased financial inclusion, and work to eliminate inequitable community financial practices through advocacy policy interventions.

Introductory Work

The call for social workers to assist in building financial capabilities among clients is codified in the “12 Grand Challenges,” issued by the American Academy of Social Work & Social Welfare (AASWSW) and endorsed by the Council on Social Work Education (CSWE) and Society for Social Work and Research (SSWR) (American Academy of Social Work & Social Welfare 2015, cited under Ethical Guidelines). Early social workers in the United States began providing financial-skills training and financial advocacy for immigrants and migrant workers in the late 19th century, although the field’s client-centered work in this area declined as social workers yielded to the expertise of other practice-oriented professions, such as consumer economics (Stuart 2016). North American financial social work has, however, experienced a resurgence in this practice domain since the mid-1980s. The financial well-being of clients is currently a main content topic in the social work literature and a central concern of our practice world. Social work has made unique contributions to the literature by locating financial literacy under the overarching umbrella of financial capability. In practice, increasing both financial ability and opportunity is needed to increase financial well-being (Sherraden, et al. 2015). The literature cited in this section presents an introduction to the topic of financial social work by providing an overview of the profession’s history in this subject area and highlighting ways in which social work researchers are uniquely addressing poverty through financial social work in the early 21st century.

• Lein, L., J. L. Romich, and M. Sherraden. October 2015. Reversing extreme inequality. Grand Challenges for Social Work Initiative, Working Paper 16. Cleveland, OH: American Academy of Social Work & Social Welfare.

  This report discusses the rise in economic inequality in the United States and suggests that outdated social policies carried over from the industrial age are no longer suited to tackle modern economic problems. The authors offer the proposition that social workers are in unique positions to address this inequality, due to the profession’s history of addressing financial oppression.

• Sherraden, M. S. 2017. Financial capability. In Encyclopedia of social work. Edited by C. Franklin. Oxford Research Encyclopedias. New York: Oxford Univ. Press.

  DOI: 10.1093/acrefore/9780199975839.013.1201

  This entry provides a general overview of financial capability and its overall relevance to more-healthful financial functioning. The author discusses ways of building financial capability, such as promoting financial education (e.g., financial literacy) and opportunity.

• Sherraden, M. S., J. J. Frey, and J. Birkenmaier. 2016. Financial social work. In Handbook of consumer finance research. 2d ed. Edited by Jing Jian Xiao, 115–127. Cham, Switzerland: Springer International.

  This chapter presents an in-depth overview of financial social work, underscoring the role of social workers in combating inequality in poverty among vulnerable populations by promoting financial stability, financial capability, and asset building through direct practice, policy, and research.

• Sherraden, M. S., J. Huang, J. J. Frey, et al. 2015. Financial capability and asset building for all. Grand Challenges for Social Work Initiative, Working Paper 13. Cleveland, OH: American Academy of Social Work & Social Welfare.

  In response to the Grand Challenges for Social Work, this report proposes two initiatives in efforts to reduce economic inequality by building financial capability for all: (1) universal asset building through a Child Development Account, and (2) an online Financial Capability Gateway to connect people with local financial services and information.

• Stuart, P. H. 2016. Financial capability in early social work practice: Lessons for today. Social Work 61.4: 297–303.

  DOI: 10.1093/sw/sww047

  This article explores how the social work profession initially focused on improving client financial capability but eventually ceded financial training to other disciplines. As the profession has evolved, an interest in financial capability has returned. This author suggests that social workers in the early 21st century could possibly learn from the interventions used by early social workers, which focused more on family budget issues to improve financial capability.