5.4.0 Individual Development Account (IDA) |
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Louisiana Statewide Transition Project and Louisiana: Healthy and Ready to Work Fact Sheet Series |
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11/3/00 |
Recently, national, state,
and local governments, low-income social service programs, and youth and adult
programs for persons with disabilities have begun to embrace the concept of
Individual Development Accounts (IDAs).
An IDA is similar to an Individual Retirement Account, but it is a
matched savings account. With an IDA, individuals
save monthly over a period of time towards a specific asset (e.g., home
purchase, post-secondary education, or development of a business) and have
their savings matched by funders (usually at a rate ranging from one dollar for
each dollar saved to four dollars for each dollar saved). For example, an IDA program with a match
rate of four-to-one would provide a participant who had saved $1,000 in a
designated IDA account with match funds of $4,000 at the time of asset
purchase. The funders that match the
personal savings of IDA holders are typically financial institutions,
foundations, churches, and state and local governments. IDAs matched with federal money can only be
used to assist with the cost of purchasing a home, post-secondary education, or
business development. IDA accounts
matched from other sources may be used to assist with the cost of purchasing
transportation or home maintenance.
This new concept in
assisting persons with low incomes to overcome poverty is a vehicle by which
adolescents and young adults with disabilities and low incomes can more
effectively and efficiently accumulate funds for post-secondary education,
homeownership, or business development.
Also, through participation in an IDA, persons with disabilities can save
money, receive economic literacy training, and accumulate assets that can
increase their personal wealth. In
addition to accumulation of assets, IDA accounts also: (a) psychologically
connect participants with a viable, hopeful future; (b) enable participants to
establish goals and to develop the skills needed to accomplish the goal;
and (c) stimulate the development of
other individual assets.
IDA programs are beginning to develop across
Louisiana. While the attributes of each
program may vary, their similarities can be summarized as follows:
1)
There
are income eligibility requirements for participation;
2)
The
purpose of the IDA is identified at the onset of the program (e.g., to purchase
a home, to attend a post-secondary education institution, or to start a
business);
3)
Participants
make regular monthly deposits to savings accounts over a specified period of
time;
4)
There
is a maximum amount participants can save and have matched;
5)
The
participants’ deposits are matched, at varying rates, by third parties (such as
businesses, philanthropic organizations, state or local governments, or
financial institutions);
6)
The
deposit accounts are maintained at a financial institution, which usually will
waive typical savings account fees for IDA-specified accounts;
7)
Participants
are required to attend training or counseling tailored to the purpose of their
IDAs; and
8)
A
community-based organization administers the IDA program, including monitoring
the participants’ deposits and their attendance at training/counseling.
For students and young adults with disabilities who
receive government benefits and/or Medicaid, it is important to know: (a) the
money saved by the individual will impact allowable cash asset limits; (b)
however, the matched savings will not.
For example, in Louisiana, if an individual who receives government
benefits saves $1,000 in an IDA account, he/she can only have an additional
$1,000 in cash assets without jeopardizing his/her benefits. However, the matched funds of $4,000 (in the
previous example, at a rate of four to one) will not impact the cash asset
limits. Therefore, the IDA participant
who receives government benefits and/or Medicaid will be able to accumulate
$6,000 towards his/her asset goal without jeopardizing his/her benefits (i.e.,
$1,000 in the IDA account plus $1,000 in another account for a total of $2,000
of participant savings in addition to $4,000 in matched funds.)
Students/Young Adults;
During high school adolescents should: (1) continually establish short- and long-term goals and work to successfully accomplish the goals; (2) establish a savings account and get in the habit of contributing to it on a regular basis; (3) develop or identify support for budgeting and money management skills; (4) learn about the fiscal and personal responsibilities of homeownership; (5) explore all post-secondary education options and their costs; and (6) learn about the personal and fiscal responsibilities of business development.
During the transition planning process, it is important that adolescents articulate their future dreams to teachers and family members. Additionally, adolescents should enlist the assistance of family members and teachers in developing personal and financial action plans to achieve their dreams. Finally, self-advocacy and self-determination skills can contribute to the success of this process.
Families:
Family members must play a key role in assisting their adolescents or young adults: (1) to establish goals; (2) to accomplish goals; (3) to explore all post-school options; (4) to articulate their dreams; and (5) to develop personal and financial action plans to achieve their dreams. Families can promote the development of money management and budgeting skills by: (1) assisting their adolescents or young adults in establishing savings accounts; (2) assisting in developing personal budgets; and (3) discussing money matters (e.g., the cost of groceries and utilities; establishing spending priorities; etc.).
Family members should learn about the IDA opportunities that are available in their communities and assist their adolescents or young adults to determine whether these opportunities match their goals.
Agencies:
Schools must provide students with opportunities to explore the fiscal and personal responsibilities of homeownership, business development, and/or post-secondary education. High school curricula need to allow students to develop money management skills and to prepare them for the fiscal and personal responsibilities associated with their asset goals (e.g., homeownership, business development, post-secondary education). Finally, the development of self-determination skills, including goal setting, should be an integral part of secondary curricula.
Agencies that provide services to persons with disabilities should investigate all aspects of IDA programs in their communities. It is important that agency personnel are aware of what programs are available, as well as their parameters. Agencies should also explore the resources available to IDA participants designed to assist them in achieving their asset goals. In addition, when requested, agency personnel should participate in the development of individuals’ personal and financial action plans for goal achievement. Finally, if no IDA program exists, agencies should explore establishing community partnerships that will support the development of a local program.
IV. RESOURCES/CONTACTS
Caleb CDC
11021 Plank Road
Baton Rouge, LA 70811
225-775-2232
Center for Law and Social
Policy
1616 P Street, NW
Washington, DC 20036
202-328-5140
Corporation for Enterprise
Development
777 North Capitol Street,
NE, Suite 410
Washington, DC 20002
Greater New Orleans IDA
Collaborative
A. B. Freeman School of
Business, Tulane University
New Orleans, LA 70118
504-865-5306
Neighborhood Housing
Services
4601 Freret Street
New Orleans, LA 70115
504-899-5900
New Orleans Neighborhood
Development Foundation
3801 Canal Street, Suite 329
New Orleans, LA 70119
504-488-0155
Office of Thrift Supervision
1475 Peachtree Street, NE
Atlanta, GA 30309
V. REFERENCES
Flacke, T., Grossman, B., Dailey,
C., and Jennings, S. (1999). Individual development account program design handbook: A step-by-step guide to designing an IDA
program. The Corporation for Enterprise Development.
Office of Thrift Supervision.
(1998). Individual development accounts (IDAs): Strategy for asset accumulation. Author.
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The development and dissemination of this
document were supported in part by funds from the U.S. Department of
Education (Cooperative Agreement #H158A6007, “The Louisiana Statewide
Transition Project: A Multi-Constituency Model”) and the U.S. Department of
Health and Human Services, Maternal and Child Health Program (Grant
MCJ-22HRW6, “Louisiana: Healthy and Ready to Work”). The opinions expressed
herein are solely those of the authors and do not necessarily reflect the
policy or position of the U.S. Department of Education or the U.S. Department
of Health and Human Services, and no official endorsement by either of these
two agencies should be inferred. The LSUMC does not discriminate on the basis of race, color,
national origin, sex, religion, age, or disability in employment or the
provision of services. This document may be duplicated and disseminated in its
original form without obtaining permission. Alternate forms of this document are available upon request at 1-888-942-8104 or TDD 1-504-942-5900. |