| Individual
Development Account (IDA)
What is
an Individual Development Account (IDA)?
Individual Development Accounts (IDAs) are matched savings accounts.
When an account is matched, it means another organization, such
as a foundation, corporation, or government entity agrees to add
money to your account.
Why would
an organization do that?
Organizations will match the money people save in IDAs to encourage
low-income families to save money to purchase an asset. IDAs are
based on the concept that asset building is necessary to break the
cycle of poverty and to help families become financially independent.
Asset building refers to people purchasing or holding items that
will help them financially in the future. Organizations involved
in IDA programs want to help low-income families become more financially
secure.
What can
I use IDAs for?
If you open an IDA, the money must be used for a specific purpose.
Allowable purposes include:
- Job training
- College
education
- Small business
start-up
- Downpayment
for a home
There are a
few programs that allow you to save for other purposes. However,
most programs will only offer accounts for the purposes listed above
because these are likely to increase your future financial security.
How do IDAs
work?
Each IDA program is a little different, so you must ask the person
who runs the program in your area about the details. However, all
IDA programs have many similar features:
- IDA programs
are generally run by local community-based organizations. They
help to recruit eligible people into the program and usually organize
the required training sessions for the participants.
- Most programs
require that the participants take a certain number of financial
education courses. Community group teachers or volunteer bankers
might teach these classes.
- Depending
on what you decide to save for, you might be required to take
additional classes. For example, if you are saving for a downpayment
on a house, you will usually have to take homeownership classes.
- If you are
saving money to start a business, you will usually take classes
to help you understand business concepts and develop a business
plan.
- If you are
in an IDA program, you must deposit some money into a special
savings account at a participating bank. You will need to make
a deposit at least once a month for the entire length of the program.
A program might last 12-36 months.
- Your reward
for saving is the education you receive throughout the program
and the money that gets added into your account at the end of
the program. When you have completed the program, the organization
will help you with the next steps.
How can
I open an IDA?
The concept of IDAs is still fairly new, although it is becoming
more popular. If you are interested you can:
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