At the Neighborhood Housing Service (NHS) of New Haven, CT, low-income participants who obtain home economics counseling and save just $20 per month in what's called an "Individual Development Account" or (IDA) are eligible for double matching funds of up to $1,000 over a two-year period.

In Austin, TX, Foundation Communities' (FC) similar IDA program requires participants to save at least $300 a year at the rate of at least $25 a month. The program double matches the money to be used toward housing, post-secondary education or business start-ups.

And "Savings Plus," at Denver, CO's Rocky Mountain Mutual Housing Association (RMMHA), is another IDA program of counseling and education that will triple-match savings of up to $1,500 toward the purchase of a home.

"I'm ecstatic and overwhelmed," said mother-of-five Rovella Weeks, a New Haven, CT postal worker who was able to purchase a five-bedroom home with the help of her NHS IDA, according to "Bright Ideas," a publication of NeighborWorks, a national network of 220 community-based organizations that helps low- and moderate-income families rent, purchase and maintain safe, affordable homes.

NeighborWorks was created by the Neighborhood Reinvestment Corporation, a network of lenders, business and government out to revitalize and restore declining neighborhoods.

Much as 401k accounts provide a nest egg for retirees, a lesser known savings and investment program called Individual Development Accounts (IDAs) is helping feather nests for low-income families after the American Dream.

"You can't beat it. The money's matched twice," Weeks said.

IDAs are also a politically philosophical switch from subsidizing incomes to helping the needy build sustainable assets.

IDAs are the brainchild of Michael Sherraden a professor of social development at the University of Michigan, who wrote "Assets and the Poor: A New American Welfare Policy," the blueprint for IDAs.

The accounts are matched savings accounts designed to help low-income families and individuals save money to purchase a home, continue their education, receive job training or start a small business. The largest single use of withdrawals is housing, according to a study of a group of organizations that implement and manage IDAs.

According to Bright Ideas, "It is clear that there is a large demand for home ownership among the poor, and it should not be assumed the very poor cannot save," said Sherraden, who is also director of the Center for Social Development at Washington University in St. Louis, MO.

The accounts are implemented and managed by community-based organizations like NHS, RMMHA and FC, funded by public and private sources and held at local financial institutions.

IDA recruits are counseled by the sponsoring community organization and receive training on budgeting, credit repair and money management.

The asset-building programs got their start in 1993, aided by the Corporation for Enterprise Development (CFED), which promotes asset-building and economic opportunity strategies in low-income and distressed communities.

More than 400 community-based IDA programs are available or in the planning stages, according to CFED.

The IDA concept got a boost in 1996 with the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which authorized states to create community-based IDA programs with Temporary Assistance for Needy Families (TANF) block grant funds. Twenty-eight states now offer some form of IDAs in their state TANF plans and 29 states have passed some form of IDA legislation.

In 1998, the Assets for Independence Act authorized the Department of Health and Human Services to conduct a five-year demonstration project to determine the effectiveness of policies to help poor people accumulate assets.

To that end, the American Dream Demonstration (ADD) was created as the first test of the efficacy of IDAs. Some 2,400 IDA program participants in 13 community-based organizations in 11 states and the District of Columbia are part of the demonstration.

The Assets for Independence Act is also expected to boost IDAs to reach an additional 30,000 to 40,000 working-poor Americans by the year 2003 and preliminary reports from ADD are positive.

As of June 30, 2000, the average participant saved 67 percent of the monthly savings target and made a deposit in seven out of 12 months. Average monthly net deposits per participant were $25.42 and with an average match rate of two to one, participants accumulated about $900 a year in IDAs.

IDA withdrawals, including matching funds, taken by more than 300 participants averaged $1,698. Among the withdrawn funds, 44 percent went for housing, 24 percent for business development and 21 percent for post-secondary education, according to NeighborWorks.

Among IDA participants not making withdrawals, 57 percent planned to use the money to purchase a home, 18 percent to start a business and 15 percent for education.

"IDA programs should be expanded and be available in the workplace. As a nation, we should be heading toward policy goals of including everyone in asset-building, making it open-ended and life-long, building assets of the poor, making asset-building fully portable, and integrating it with income-support policy," Sherraden said in an interview with Bright Ideas.

For more articles by Broderick Perkins, please press here.

Published: September 20, 2001

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.