**Individual Development Accounts**

***Individual Development Account (IDA) -- a [matched]{.underline}
savings account used for a [defined]{.underline} asset goal.***

Modeled on IRAs and 401ks, IDAs provide lower-income workers and their
families with an incentive to earn and save more, invest in themselves
and join the economic mainstream. IDAs must be used for specified
purposes such as homeownership, post-secondary education, or small
business development. Some IDAs are available for additional assets,
such as automobiles, computers, or home repair.

*begin text box*

**IDA Example**

Personal savings \$1,000

Match rate \$3:\$1

Match funds [\$3,000]{.underline}

Total available for asset investment \$4,000

*end text box*

IDAs are structured to offer a savings incentive, between \$1 and \$8
for every dollar of personal savings, with a cap on matching funds per
account usually between \$2,000 and \$8,000. In most cases,
accountholders save between \$500 and \$4,000 over a 6- to 36-month
period. Monthly deposits range from \$10 to \$100 per month.

![](media/image1.wmf){width="4.114566929133859in"
height="2.7161417322834644in"}Over 500 community-based organizations,
government agencies, and faith-based groups across the country have made
it possible for more than 20,000 workers to save in IDAs. The majority
of these IDA programs began opening accounts after 1998.

Data through the end of 2002 shows that at least \$14.5 million in
personal savings have been invested in 8,000 assets; over \$22.5 million
in match funds and \$130 million in loans from financial institutions
leveraged these asset purchases[^1]. []{.mark}

> ***"... we regained our self-confidence. We know we have the skills
> and knowledge to keep our family on solid financial ground. The things
> we learned are not just applicable to our one goal of homeownership --
> they are skills for life."***
>
> Austin, Texas IDA Accountholder
>
> **IDAs Make Savings Work**
>
> **IDAs...**

-   Offer Incentives -- tax deductions aren't enough for low-to-moderate
    income families

-   Make assets attainable for working families in the near-term

-   Make saving easier -- access to mainstream accounts, promotes tools
    like direct deposit

-   Build financial literacy and develop longer-term goal orientation

-   Assist in overcoming obstacles -- debt management, credit repair

-   Build capacity to acquire, maintain, and protect productive assets

-   Offer hope -- transforms expectations for the future

**The potential impact of idas is significant**

[]{.mark}

**This example illustrates the return on investment in one employee:**

**Employer Investment**

Financial Ed/Counseling \$200 \-- \$500

IDA (match) \$2,000 \-- \$8000 (dependent on match rate)

**Impact to the Employer**

Return on Investment (ROI)[^2] Financial Education 3:1

Improvement in the Bottom Line \$600\-- \$1,500

**Impact to the Economy**

Local Economic Multiplier of Asset purchase 3.0

Total Impact to Local Economy \$6,000\-- \$24,000

> ***"Income may feed people's stomachs, but assets change their
> heads."***
>
> Michael Sherraden, Washington University

[^1]: CFED. "A Look at the Growing Individual Development Account Field:
    Results from the 2003 Survey of IDA Programs," p. 4, 2003.

[^2]: Garman, E T. (2003) "A Conceptual Model of the
    Return-on-Investment of Workplace Financial Education and Assistance
    Programs."