Everything You Need to Know About Individual Development Accounts (IDAs)
- What are IDAs?
- Can low-income people save?
- What is the impact of IDAs?
- Why should there be a public investment in IDAs?
- How can I start an IDA program?
- How are IDA programs funded?
- Does Prosperity Now make grants to IDA programs?
- Can IDA programs help people with unearned income, e.g. disability, SSI, or SSDI?
- How can I find existing IDA programs?
- How do I add or update my program's listing in the IDA Program Directory?
- How can I join the IDAnetwork listserv, post a message, or manage my subscription?
What are IDAs?
Individual Development Accounts (IDAs) are special savings accounts that match the deposits of low and moderate income savers. For every dollar saved in an IDA, savers receive an additional dollar, or more, depending on the guidelines of each program. Typically, IDA savings and match may be used for postsecondary education or job training, homeownership, or to start a small business. In addition to earning match dollars, participants learn about budgeting, saving and receive additional training before purchasing an asset. More information about participation in IDA programs is available in this Fact Sheet.
Yes. There is documented evidence from IDA initiatives that low-income people, with proper incentives and supports, will save regularly and acquire productive assets. For example, 2,128 low-income families participating in the American Dream Demonstration, the first large-scale test of IDAs, saved $602,181 as of June 2000, and these savings leveraged another $1,146,919 in matching funds. The average monthly net deposit per participant was $19, and with an average match rate of 2:1, participants accumulated about $700 per year.
What is the impact of IDAs?
Over the last decade, more than 85,000 IDAs have been opened in programs administered by more than 1,100 sites across the country. The impact of this initiative has resulted in more than 9,400 new homeowners, 7,200 educational purchases and 6,400 small business start-up and expansion purchases.
The study, "Weathering the Storm: Have IDAs Helped Low-Income Homeowners Avoid Foreclosure?" tracked 831 homebuyers in 17 states who purchased homes using IDAs between 1999 and 2007. Compared to other low-income homebuyers who purchased homes in the same communities and over the same time period, IDA homebuyers: Obtained significantly preferable mortgage loan terms, with only 1.5 percent having high-interest mortgage rates, compared to 20 percent of the broader sample; and were two to three times less likely to lose their homes to foreclosure. This study provides the first evidence available on loan terms and foreclosure outcomes of IDA homebuyers. The findings suggest that participation in an IDA program with its related services and restrictions can improve homeownership outcomes for low-income households.
While the number of IDA programs across the country has grown tremendously in recent years, escalating demand and scaled-back resources have made it difficult for organizations to raise funds to continue or start additional programs. Millions of Americans who do not own assets and others who do not have a bank account are not currently benefiting from IDAs. Greater public and private investment is needed to make IDAs more widely available.
While returns on IDA investments are difficult to calculate, Prosperity Now estimates that each federal dollar invested in IDAs would yield a return of approximately five dollars to the national economy in the form of new businesses, additional earnings, new and rehabilitated homes, reduced welfare expenditures, and human capital associated with greater educational attainment.
How are IDA programs funded?
Currently, the largest provider of matching largest provider of matching funds for IDA programs is the federal government's Assets for Independence (AFI) program. As a condition of funding, AFI applicants must raise non-federal funds in an amount equal to or greater than their AFI project grant. Grantees may use 15% of the grant for operating costs. The AFI Resource Center has extensive information on IDAs including how to apply for funding and how to administer IDA programs. In addition, many states fund IDA programs. See Prosperity Now's Assets & Opportunity Scorecard for more information. Many programs also seek funding from private foundations and corporations with an interest in asset building.
While Prosperity Now provides information, technical assistance and other resources to IDA programs, we are unable to provide grants.
Can IDA programs help people with unearned income, e.g. disability, SSI, or SSDI? Many IDA funding sources, including the federal Assets for Independence program, require that deposits to IDAs be made from earned income. Because benefits such as disability, SSI and SSDI are not considered earned income, the accountholder would have to have an alternative income source in order to contribute to the IDA.?
Another important consideration is the asset limit set by the SSI program. If an IDA program receives federal funding for IDAs (e.g., AFIA or TANF), then the asset limits of $2,000 ($3,000 per couple) do not apply. Otherwise, all funds in an IDA (including the match) will count toward the $2,000 limit. When opening an IDA for a person receiving SSI, it is very important, especially if this is the accountholder's only income, that the rules be followed; otherwise, they could lose benefits.
The IDA Program Directory offers contact information for hundreds of IDA providers across the country. In addition, the federal Office of Community Services offers a directory of more than 200 organizations across the nation that run IDA programs. Visit www.acf.hhs.gov/programs/ocs/afi/states.html to view a list of programs by state.
How do I add or update my program's listing in the IDA Program Directory?
Please send an e-mail to email@example.com. We will update your information promptly.
Visit our IDAnetwork listserv page for instructions. If you need additional assistance, contact Prosperity Now at firstname.lastname@example.org.