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Individual Development Accounts Program Overview

Individual Development Accounts Program Overview

Individual Development Accounts Program Overview
Program Overview

An Individual Development Account, or IDA, is a special savings account for people with low incomes

If you save in an IDA, your money will be matched with donations. That means that you can receive another dollar or more for every dollar you save in an IDA

IDA programs match each dollar you save with additional funds from donors. Many programs offer a 1:1 match rate, which means that for each $1 you deposit in your IDA, $1 in matching funds will be added to your savings. Depending on the program, though, match rates can be more or less

IDA savings and match money can be used for multiple purposes including buying a house, paying for education or job training or starting a small business

Match dollars for IDAs come from many different places, such as government agencies, private companies, churches, or local charities

Any individual, organization or business can contribute match dollars to IDAs. In most cases, donors can get a tax deduction for contributions to IDAs, and they are also recognized for helping others in their community

IDAs are usually offered through programs that involve partnerships between local nonprofit organizations and financial institutions

The local nonprofit is also called the IDA program sponsor. The IDA program sponsor recruits participants for the IDA program, provides financial education classes, and may also provide one‐on‐one counseling and training to participants. After signing up for an IDA program, each participant will open an account with a partnering bank or credit union

The bank or credit union handles all transactions to and from the IDA, just as they do with other types of savings accounts. Each month, IDA participants receive a report telling them how much money (individual savings + match + interest) is accumulating in their IDA

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

IDA participants are allowed to withdraw money as soon as they have reached their savings goal, but they must first get approval from the IDA program sponsor

There are more than 500 IDA programs in the United States, so the first step is to find a program close to where you live. The fastest way to do this is to go to the IDA Directory

Using the Directory, contact the sponsor(s) closest to you to find out more about their IDA programs and learn how to apply

Program Eligibility

In most cases, people who open IDAs are required to attend financial education classes to learn about creating and managing household budgets, using credit responsibly, the basics of saving and investing and saving for retirement. Accountholders may also receive one-on-one counseling and other training

Most IDA programs specify a maximum household income level for IDA applicants. Maximum income levels are most often a percentage of the federal poverty guidelines (usually 200%) or the area median income (usually between 65% and 85%) 

Many IDA programs also require that all or part of savings come from earned income. A paycheck is the most common source of earned income, but welfare, disability, social security, or unemployment checks are also earnings. Money given as a gift is not considered earnings

Some IDA programs also look at the household assets (such as a car, home, savings, etc.) in addition to household income when determining IDA eligibility. If you own assets valued at more than $5,000, you may not qualify for an IDA with these programs

Debt from credit cards and loans makes it difficult to save. You might not qualify for an IDA if you have a lot of debt or a bad credit history. A program sponsor may ask you to visit a credit‐counseling center or pay off your loans before you open an IDA

Some programs will only match up to a certain dollar amount (for example, $500) on an annual basis or during the course of the program. In most cases, you can deposit as much as you like in your account, but deposits over a certain dollar amount will not be matched

Some programs require accountholders 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

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