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Individual Development Accounts:
A New Way to Save

Are you one of the many people who feel uncomfortable about money? Do you spend too much money on small things and not have enough for important purchases? Do you want to go back to school, start a business, or buy a home, but lack the money? Do you have trouble saving?

If you answered “yes” to any of these questions, you may qualify for an exciting government program that will double your savings and guide you to financial success!

What is an IDA?
Individual Development Accounts (IDAs) help low-income individuals start savings accounts and learn about money. IDA program participants work with a local nonprofit organization and financial institution to learn about handling money responsibly and increase their savings.

When you join an IDA program, a donor gives you one to eight dollars for every dollar you save. Contributions are called “savings match grants.” At the end of the program, you can use your savings for education, your first home purchase, business development or even medical expenses in some states.

What can an IDA program do for me?

• Commits you to saving under guidance for a year.
• Helps you set up an account at a nearby bank.
• Helps you create a budget and decide how much you want to save.
• Educates you about economic responsibility through regular workshops.
• Provides you with savings match grants that will double your savings.

What can IDA funds be used for?

• Buying a home
• Starting a business
• Education or Training
• Medical Expenses (Iowa and Maine only)
• Asset Building!

What are assets?

Anything substantial that you have, such as a savings account, a home, or a business, that gives you long-term benefits, such as money or security.

IDAs Work!
Low income families can and do save money. To date, approximately 10,000 participants have saved through IDA programs, including former welfare recipients, youth in poorly funded urban and rural schools, recent refugees and low-income working families.

IDA participants receive a valuable financial education. You will learn how to repair your credit, reduce spending, and avoid “loan sharks” and pawn shops. You will not have to cash your paycheck every month because an IDA allows you to save the money you need for your future.

How do assets benefit me and my community?

Assets make you more financially secure and give you a safety net in times of trouble. With assets in hand, you will be less likely to need financial assistance.

Assets help you to invest in yourself. You can use the security that assets provide to start a business, go to school or buy a home.

Assets allow you to add to your local economy, helping it to grow and prosper. You can use your assets to improve your community!

How do private individuals, the government, and businesses benefit from helping people grow assets through IDA programs?

IDA programs help people become more self-sufficient and financially independent. People with a secure economic background seldom need welfare or other forms of public assistance. They also have more resources to give back to their communities.

Who is eligible to open an IDA?

You can participate in an IDA program if you are eligible for TANF, for the Federal Earned Income Tax Credit (EITC) or have an income less than two times the Federal poverty line, which was approximately $37,000 for a family of four in 2004. At the time you enroll in an IDA program you must not have more than $10,000 in assets, excluding an automobile and a home.


How can I get an IDA?

1. Use the resources listed at the end of this tip sheet to find out which financial institutions and nonprofits in your community offer IDA programs.

2. Visit or call a nonprofit institution that administers IDAs and enroll in its program.

3. Plan your saving goals and monthly contribution with the help of the staff member assigned to guide you through the IDA program.

4. Complete a letter of agreement with the organization administering the IDA program.

5. Attend free financial literacy trainings, usually provided by the organization administering the IDA program.

7. Begin to make regular deposits in your IDA and you will receive savings match grants.

8. When you have met your goal, you can spend your savings on education, business development or home ownership.

IDA rules and regulations differ by state. Use the following contacts at the end of this tip sheet to find out more about an IDA program near you.

IDAs in Law
The government established an Individual Development Account (IDA) program under the Assets for Independence Act of 1998. Most states include IDAs in their Temporary Assistance for Needy Families (TANF) Statute. One benefit of opening an IDA is that savings in the account do not count as assets for the purpose of qualifying for state benefits. Therefore, opening an IDA will not prevent you from receiving other state benefits that you may now be getting.

Today many IDA advocates across the country are working to advance state policies and expand funding for IDAs so that even more Americans will be able to benefit from this program.

Where Does the Money Come From?

How long will I be able to save in my IDA?

The savings period or program length will vary from program to program, but most savings periods range from 1 year to 3 years. The savings period indicates the length of time during which your savings will be matched.


Will I be required to save a certain amount of money each month?

Some programs require account holders to deposit a minimum amount each month or every few months in order to stay in the IDA program. Before enrolling, make sure that you can save enough to make the minimum deposit.


Aside from attending classes and making regular deposits to my IDA, will I be required to do anything else?

Make sure you are aware of all requirements before enrolling in an IDA program. For example, if the program is hosted by a faith-based organization, will you have to attend religious services or other religious activities?

What is the program’s match rate?

IDA programs match each dollar you save with additional funds from donors. Most programs offer a 2:1 match rate, which means that for each $1 you deposit in your IDA, $2 in matching funds will be added to your savings. Match rates can be more or less than $2 for each dollar you save. The match funds cannot be withdrawn without the approval of the IDA program sponsor, but they will be reported on monthly account statements so you will know how much money is growing in your IDA.


Does the IDA program sponsor provide other services that might be useful to me?

Many IDA program sponsors provide a range of services to low-income families. For example, some organizations may assist families in applying for welfare benefits, obtaining legal aid, preparing income tax returns, or obtaining affordable housing. Be sure to ask each IDA program sponsor about additional services that might be helpful to you.

Resources

IDA programs exist in all 50 states, the District of Columbia and Puerto Rico. The IDA Network can direct you to a local program that will guide you to financial success!

The IDA Network
Phone: (202) 408-9788
Fax: (202) 408-9793
Web: www.idanetwork.cfed.org
Email: idainfo@cfed.org

Alternatives Federal Credit Union
Telephone: (607) 273-4611
Toll Free: (877) 273-AFCU
Fax: (607) 277-6391
Web: www.alternatives.org
E-mail: afcu@alternatives.org

For fact sheets about the IDA programs in your state or to contact a local Assets for Independence agent.

Assets for Independence
Telephone: (202)-401-4626
Web: www.acf.hhs.gov

The Finance Project
Information for Decision-Making
Phone: (202) 587-1000
Web: www.financeprojectinfo.org

Have more questions about your finances? Women Work! offers free tip sheets on a variety of topics including: investing, starting your own business, fixing your credit and getting your finances under control. All Women Work! tip sheets are available on our website, www.womenwork.org.


Tip sheet last updated 8/06