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IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
IDA presentation
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IDA presentation

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  • 1. Individual Development Accounts Asset Building as a Poverty Reduction Strategy
  • 2. What is an IDA?
    • Matched savings accounts to help low income families save and build assets
    • The match creates and incentive for people to save and deposit money into the account on a regular basis to save for a large investment such as education or buying a home
    • Match dollars for IDA accounts are provided from both private and federal funds
  • 3.
    • While a paycheck helps to buy things like food and clothing and pay the bills each month, an asset provides financial security for the future.
    • CFED WWW.CFED.ORG
  • 4. How an IDA Works
    • Usually sponsored by a local non-profit in partnership with a financial institution
    • The bank or credit union handles all transactions to and from the IDA like a regular savings account
    • Provided with a monthly report of the savings + match + interest that has accumulated
    • Can be as short as a year or as long as five
  • 5.
    • Participants can withdraw money once they have reached their savings goal, or risk loosing the matched funds
    • IDA eligibility can include:
      • INCOME -max income levels determined by percentage of poverty guidelines or area median income
      • EARNINGS- require that all or most of the savings come from earnings such as paycheck, but welfare, disability and social security count too
      • NET WORTH- assets such as car, home, or savings over $5,000 can disqualify you
      • CREDIT HISTORY- credit card and loan debt can make it hard to save and a bad credit history can disqualify you for an IDA
    • An IDA may require a certain amount of money be deposited each month and how much total money can be saved
  • 6. Other forms of IDAs
    • THE SEED INIATIVE
    • Saving for Education, Entrepreneurship, and Down Payment
    • Long-term saving accounts established at birth for a lifetime for every child in America and held to at least age 18
    • Seeded with an initial amount of $1,000 and then built upon by family, friends, and the account holder
    • Augmented by public and private sources
    • Restricted uses of education/training, starting a small business, buying a home, or financing retirement
    • $1,000 invested for 18 years at a 6% rate of return yields almost $3,000. Add $100 per year and it jumps to $5,000. If you added $50 a month to the base, the total would be almost $22,000
  • 7. The Effects
    • At the present, little is known about the potential of SEED Accounts
    • WHAT WE DO KNOW:
    • People, even poor people, can and will save with the right support and structure
    • Growing assets change behavior, economic and social opportunity
    • Conventional IDA’s don’t engage most youth
    • Age appropriate education tied to accounts may yield enormous benefits
  • 8.
    • “ Antipoverty measures have focused almost exclusively on providing the poor with regular income support…At the same time, welfare policy discouraged savings, imposing limits on how much money a welfare recipient could hold in a bank without forfeiting benefits. It is no surprise, then, that the question of whether poor people can save has rarely been asked or answered.”
    • ~ Owning Up p. 153
  • 9. A Brief History of Structural Savings Programs in America
    • The American Government has helped millions to save over the years to acquire assets and gain economic independence
      • THE HOMESTEAD ACT
      • THE MONTGOMERY GI BILL
      • 401(k)s
      • THE HOME MORTGAGE INTEREST DEDUCTION
  • 10. IDAs 1989- the Present
    • Michael Sherraden partnered with the CFED to bring ideas about IDAs into the mainstream (1980s)
    • The first IDA hearings were held by the Select Committee on Hunger and introduce IDA legislation to the U.S. House (1991)
    • The first IDA legislation was adopted in Iowa and the first IDA initiatives were enacted by community-based agencies (1993)
    • The Joyce Foundation funded 3 IDA pilot programs in Illinois, Indiana, and Wisconsin
    • IDAs were offered as a state option as part of the national welfare reform (1996)
    • CFED and CSD launched the American Dream Demonstration
    • (1997)
  • 11. The American Dream Demonstration 1997- 2002
    • THE FIRST LARGESCALE TEST OF IDAs
    • COMPREHENSIVE EVALUATION ON THE EFICACY OF IDAs
    • EIGHT RESEARCH METHODS:
    • 1) Implementation Assessment
    • 2) Participant Case Studies
    • 3) Cross-Sectional Survey
    • 4) Monitoring
    • 5) In-depth Interviews
    • 6) Cost Analysis
    • 7) Experimental Impact Evaluation
    • 8) Assessment of Community Effects
  • 12. What the ADD Found…
    • Given the right incentives and support, even very poor people will begin to save and acquire assets
    • IDAs can be effectively administered by a wide range of community agencies and financial institutions
    • The clear implications of state, local, and federal economic policy:
    • Any economic policy that seeks to promote asset building through home ownership, etc. should include low-income citizens by offering IDA incentives and access
  • 13. Since the ADD
      • By 1998, the bipartisan support of IDAs led to the authorization of the Assets for Independence Act
        • Updated version of Sherraden’s 1991 bill
        • Authorized $125 Million in federal funds over 5 years for the creation of 30,000-40,000 new IDAs
      • In 1999 the U.S. Dept. of Health determined that IDA participation does not count as TANF assistance and does not count towards the 5 year limit
      • In 2000, presidential candidate George W. Bush includes IDAs as part of his ‘New Prosperity Agenda’
  • 14. Legislation Since 1999
    • 1999 Savings for Working Families Act (S. 2023)
    • 2000 SWF Act expanded and reintroduced with Community Renewal and New Markets Act of 2000 (S. 2779/ H.R. 4106)
    • 2002 The Charity Aide, Recovery and Empowerment Act (CARE) is introduced and includes the IDA tax credit
    • 2004 The America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act Introduced, aka “KIDS Accounts”
    • 2005 ASPIRE, CARE, and SWFA are reintroduced
  • 15. ASPIRE
    • Establishes an investment savings account and to receive a matching federal contribution for any U.S. Citizen born after December 31, 2006 whose modified adjusted gross income is below the applicable national median adjusted gross income
    • Treated the same as a
    • Roth IRA
    • Secretary of Treasury would
    • develop programs to
    • promote financial literacy
    • of KIDS Account holders
    • As of 4/21/05, referred to
    • House Committee on Ways
    • and Means
  • 16. Savings for Working Families Act of 2005
    • Allows low-income individuals between 18 and 61 to establish tax exempt IDAs
    • Pay for qualified expenses such as education, first-time home buying, and business capitalization or expansion
    • Tax free IDA withdrawals for qualified expenses
    • Completion of financial education course before withdrawal
    • Grants tax credits to financial institutions, non-profits, and Indian tribes who sponsor and administer IDAs
    • IDAs cannot be used for determining eligibility of federal assistance
  • 17. The Benefits
    • Greater Economic Stability
    • Higher Property Values
    • Lower rates of divorce
    • Decreased risk that poverty will be transmitted to the next generation
    • Better health, higher self esteem
    • Better planning for the future
    • Improved perceived social status
    • Fewer arrests
    • Avoidance of unplanned pregnancies
  • 18. Do IDA Accounts Work?

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