Module 4

Report
Asset Development Strategies
for
Persons with Disabilities
Module 4 - Individual Development
Accounts
Introduction
Module 4
•
Today we will focus on a new asset building strategy to
help you save and advance your economic selfsufficiency. This fourth session will provide you
information about Individual Development Accounts
(IDAs).
•
Before we learn about IDAs, let’s do an exercise.
Module 4
•
If you had a choice of saving dollars for:
o
o
o
buying a home,
starting a business, or
continuing education,
Which one would it be?
Tell us why you made your choice.
Individual Development Accounts
•
These three goals are the goals for an Individual
Development Account (IDA). Each will help you
obtain an asset.
A home can grow in value and someday be sold for a profit.
• A business also can grow in value and someday be sold for
profit. A business also can grow in value and increase your
income that can provide you new funds to be saved and
invested.
• Continuing your education is also a proven strategy to gain
skills that can help you get a better job and make more
income. All three asset goals are important steps to
advancing a better economic future.
•
Asset Development Strategies
for
Persons with Disabilities
Module 4 - Individual Development
Accounts
Overview, Purpose, and Expected
Outcomes
Individual Development Accounts
(IDAs)
•
Saving money from month to month is hard to do.
•
It would be easier to do if I told you that there is a
program that will match dollar for dollar each
dollar you set aside in a separate account for one of
three asset goals: buying a home, starting a
business, and continuing an education.
•
The program is called an Individual Development
Account or IDA.
Individual Development Accounts
• Today, we are going to learn more about IDAs
and the benefit to you in setting an asset goal
and having a matched savings plan. We are
going to hear from an IDA program provider and
learn more about opportunities with IDA
providers across the state.
Individual Development Accounts
•
Participating in an IDA program is one way you can
become more independent, less dependent on
government benefits, and have a better economic
future.
•
There are 4 IDA programs in Virginia.
•
From the homework assignment, we want you to learn
more about an IDA program in your community.
Individual Development Accounts
• From our presentations and discussions today,
we will learn:
what is an IDA,
o what are the key program elements,
o who are IDA providers in Virginia, and
o new choices to be made to benefit from saving and
an asset building plan.
o
Asset Development Strategies
for
Persons with Disabilities
Module 4 - Individual Development Accounts
Main Presentation
IDA: A Benefit for Low Income
Workers
•
Individual Development Accounts or IDAs are matched
savings accounts designed to help low income workers
plan for and reach specific asset building goals.
•
Nationwide, there are over 13,000 individuals who are
saving money each month as part of an IDA program.
Federal Legislation Approved
• Dream Demonstration influenced passage of
the Assets For Independence Act (AFIA).
• Provides 20 plus million dollars annually to fund
IDA demonstration projects nationwide.
Module 4
• Proved low-income workers could save and
build assets.
• Improved the self-concept and physical and
mental health of low-income workers.
Congressional Findings
•
Economic well-being does not solely come from
income, spending, and consumption. It also requires
savings, investment and accumulation of assets.
•
Assets can improve economic stability and
independence, connect individuals with a viable and
hopeful future and stimulate development of human
and other capital.
Savings Agreement
• An eligible individual who is working signs a
savings agreement with an IDA provider to
establish an asset goal and how much income
will be put in a special savings account for a
specific purpose.
Savings Agreement
• The Savings Agreement:
Identifies the Asset Objective
o Sets a goal of the total amount to be saved and
matched
o Sets a savings/investment schedule of the specific
amount to be deposited at regular intervals
o Agreement reached with the Program Manager on a
match rate
o
Individual Development Accounts
• Federally supported IDA programs offer lowincome workers three choices for asset goals:
Buy a Home
o Start a Business
o Continue higher education
o
Individual Development Accounts
•
The IDA established for an individual has two
other core program elements in addition to
setting an asset goal and a plan for saving to
meet the goal:
There is a match the IDA program provider will
offer for each dollar saved in the account.
2. Each participant will also be required to
participate in financial education classes.
1.
Matched Savings
• In IDA programs nationwide, the match may
range from one to four dollars.
• The maximum federal contribution to an IDA
account is $2,000 and must be deposited with
an equal amount of nonfederal dollars for a
minimum of $4,000.
Case Example
•
Susan has set an asset goal to start a business. Susan
enters into a savings agreement with the IDA provider
to save $50 per month for two years.
•
The IDA provider indicates that the program will match
her contribution with four dollars for every dollar she
saves and places in the account.
Case Example
• At the end of two years, Susan has contributed
$1,200 to her IDA. The IDA program will match
her savings with $4,800.
• Susan now have $6,000 to start her business.
Individual Development Accounts
• All IDA savings plans must be accomplished
within five years.
• Many IDA participants leverage other public and
private funding sources to meet their ultimate
asset goal.
Individual Development Accounts
• For example, if the asset goal was to purchase a
home and the savings plan was $50 per month
for five years and was matched four to one, the
individuals would have $15,000.
•
This IDA was further enhanced by a state’s first
time homebuyer assistance program to make it
possible to purchase a home.
Financial Education
• In IDA programs, there are federal requirements
that participants enroll in financial education
classes.
• Most projects require at least 12.5 hours of
training before a proposed asset can be
purchased.
IDA Program Eligibility
•
Eligibility is based on a maximum household level of
income and often relies on the federal poverty level as
a guideline.
o
o
o
Typical eligibility is 100 to 200 percent of the federal poverty
level. Household net worth must be less that $10,000,
excluding value of car or home.
Individuals with disabilities who are working part- or fulltime
and are eligible for EITC would also be eligible for an IDA.
Minimum age requirements will vary by IDA program
provider.
IDA Federal Statistics
(past six years)
• 76% of participants were female
• 85% had a high-school diploma
• Age range of 20 through 49 years
• About 20% were employed part-time
• 33% had not used a checking account
• 50% had no prior savings account
Impact on Other Public Benefits
• Federally funded IDAs are exempt from
counting as an asset for the purposes of
remaining eligible for SSI and Medicaid.
• An IDA with savings plans could actually help
preserve eligibility for Social Security benefits.
Individual Development Account
Providers
• Statewide, there are 4 IDA programs.
• IDA program managers could include:
Community Action Agencies
o State and Local Government Agencies
o United Way Affiliates
o Community and Faith-Based Groups
o
Find IDA Providers in Virginia
• See attached list of IDA providers in Virginia
Questions to ask IDA Providers
1. Who is eligible?
2. Focus on only home ownership or also starting a
business or continuing higher education.
3. Are funds available to enroll new eligible low income
workers?
4. What rate do they match savings?
5. What are the financial education requirements?
IDA Example
• “Samuel” Program Example
o
Beyond Acquiring Work to Fulfilling Dreams
Are you ready for an IDA?
•
Are you ready to select one of three asset goals?
•
Are you working and want to commit to a savings plan
and schedule?
•
Are you willing to attend financial education classes?
•
Are you a good credit risk that will encourage the IDA
provider to enroll you in the program?
Tips to Remember
• You must be working and be willing to
contribute to earned income
• Your eligibility for SSI or Medicaid will not be
impacted negatively.
• You must make a commitment to saving weekly
and/or monthly.

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