Individual Development Accounts

• What it is and why it works
• Approaches
• State and federal legislation
• Resources pertaining to this strategy

What they are and why they work

Individual Development Accounts (IDAs) are dedicated savings accounts earmarked for purchasing a first home, for education and job training expenses or for capitalizing a small business. Contributions from eligible low-income participants are matched, using both private and public sources. IDAs are managed by community-based organizations and are held at local financial institutions. This innovative strategy is based on a fundamental truth that long-term economic security is achieved through savings and asset accumulation.

• IDA programs often require economic literacy training that shows participants how to improve their credit, and establish a savings and budget schedule. They learn the basics of money management and how to participate in the new global economy.
• Current welfare policy raises people only to the poverty line-leaving them one sickness, one accident or one divorce away from poverty. While ensuring that families have food, shelter and clothing is imperative, this will not produce a real escape from poverty. Supporting IDA legislation transforms welfare policy from one that is based on spending, consumption and subsistence to one that is premised on increasing low-income families' ability to invest in their futures and achieve long-term economic independence.

Approaches

• In the District of Columbia, Wider Opportunities for Women helped bring the nation's first incorporated nonprofit Individual Development Account collaborative to fruition. The Capital Area Asset Building Corporation (CAAB) now includes 11 organizational partners and over 100 IDA participants. CAAB was selected to become part of the "Downpayments on the American Dream" IDA demonstration project, sponsored by the Corporation for Enterprise Development. The American Dream project was designed to implement and assess IDAs at a national level and to prove the efficacy of the strategy for more widespread use and duplication. CAAB provides matching funds, assistance with financial literacy curriculum development and evaluation to member community-based organizations to implement IDA programs. Contact Richard Hall, CAAB, 202-638-3143 or rhall@wowonline.org.
• California's American Dream IDA demonstration project, the East Bay IDA Collaborative, was designed and implemented with the help of Californians for Family Economic Self-Sufficiency (CFESS) members. The student parents of Oakland, CA-based LIFEtimE, in particular, recognized the nexus between asset building and college education. Currently, over 40 LIFEtimE student parents have IDAs and there are 50 more on a waiting list for the program. LIFEtimE is pursuing funding to administer the IDAs along with essential services like child care and transportation. Contact Diana Spatz, LIFEtimE, 510-452-5192 or dspatz@hotmail.com.