I heard of this account some years back and I was immediately intrigued as a Realtor and even more intrigued as a credit professional – after all we stress budgeting and saving all the time!
So, what is an IDA? An Individual Development Account is a special matched savings account that helps families and individuals with limited financial resources to establish a pattern of saving, building assets, furthering their education or job training, or to start/expand a small business.
When you save in an IDA your money is matched with donations dollar for dollar (or more). You will also be enrolled in financial education classes covering topics in budgeting, saving, banking and more. The idea is to encourage others to invest in assets. Your take-home pay will cover food, clothing, bills and other necessities, your saving dollars that are matched are used to help you purchase a home, invest in a business, or seek higher education.
Matched dollars are provided by the government, private companies, churches and local charities.
How do they work?
You contact an IDA program sponsor to enroll. The sponsor will provide you with all of the financial education classes, one-on-one counseling and training. You will open up an account with a partnering bank or credit union that will handle all transactions to and from IDA. Each month, IDA participants will receive a statement tallying their personal savings, matched savings, and interest accrued! Most IDA programs that I've heard of are 2 years. There are some that provide accounts as short as 6 months and as long as 5 years.
This is phenomenal for students seeking help for room, board, tuition and/or books; individuals and families in need of assistance in saving for a down payment or closing costs; and aspiring business owners.
Program sponsors provide additional training based on participant's goals. For example, those seeking to start a business are taught the necessary skills to be successful in starting and growing their business. Those that are seeking to purchase a home are provided home ownership tips and guidelines.
It's important to note that each program sponsor's requirements and offerings are different. Some will allow you to use your matched funds for other goals such as housing repairs, a car, and retirement; others only focus on one goal such as Housing IDAs or Small Business IDAs.
The key is to ask questions, review all paperwork and requirements and ask about fees. Yes, not all IDA accounts are free. All costs are put towards participant benefits though – classes, one on one counseling sessions with an expert (i.e. assistance with building your business plan).
So, how do you know if an IDA is for you?
Investigate! I will say that if you are paying off a lot of loans or have a lot of credit card debt, this may not be for you right now. Some have been denied participation due to their credit history. Take care of that first. When your savings goal has been reached, you want to be able to jump on it right away.
To find an IDA program nearest you visit the IDA Directory. There is a directory on there that lists program sponsors by state. Simply contact them to find out their particular program and how you can apply. The Federal Office of Community Services also has a directory of about 200 companies across the country that have IDA programs; you can view them at www.acf.hhs.gov/programs/ocs/afi/states.html.
And if credit is holding you back from participating in this program; please feel free to reach out to me, I'd love to help!