What Are Individual Development Accounts (IDAs) and How to Use Them

Posted in tcochelps

Just imagine you have a savings account in which for every dollar you put in, you will be matched with one more dollar. You would actually receive totally free money, and who wouldn’t jump at such an opportunity.

Well, you could get into such a position via a so-called ‘Individual Development Account’, or IDA, program. Generally, money contributed in an IDA can be used to purchase a house, pay for education cost, or for starting up a new business.

Most IDA programs are sponsored by various nonprofit organizations and a number of companies, though some of them are also sponsored through government contributions. For each dollar you put in, usually the sponsor will be adding $1 or maybe more to your IDA account.

Because various groups are supporting various IDA programs, the match level as well as the requirements may vary, but still, you will be able to see that, because of regular matches, your IDA savings account will grow quickly. If you want to see if you qualify for an IDA, contact your bank, credit union, your local Housing Authority, or a Community Action Agency staff member.  

The US Corporation for Enterprise Development (CFED) is among the first organizations that supported these IDA programs, and today, the CFED is continuing its impressive support of this great innovative initiative that is very helpful in the creation of economic opportunities. If you want more information on IDA program options, check out the CFED website, and discover how to best get started.

An Individual Development Account (IDA) is among the most promising economic tools that are set up to support low-income individuals save money, build up assets, and become part of financial mainstream America. Through contributing to the monthly savings of working-class American families, IDAs will open doors to additional education, home ownership, bigger retirement funds, and better business opportunities.

IDAs are working like matched savings accounts. For each dollar that you put in an IDA, your sponsor will match the deposit with a certain amount. There are IDAs that will match you a dollar for each dollar you put in, other IDAs are matching $1,50 or $2 for every dollar you save. The match amount is depending on the IDA program, but in all cases you see that a match is helping you add up your money quickly.

Upon applying for an IDA account, you are required to submit an indication on how you plan to use the savings that you will accumulate. Generally, IDA accounts can be used for these 3 purposes:

Educational purposes and vocational training, including child care and textbooks

Homeownership which may also include mobile homes

Start-up or expand  a small business (self-employment purpose)

There are also IDA programs that allow the money to be applied for retirement or some other purposes. If you want to know if that is also an option in your area, please contact your local IDA organization (Community Action Agency or Housing Authority).

Here are some resources on this topic. Note that this listing is in no way complete and it also is not suggesting endorsement by NEFE or Community Action Partnership, and your community library offers more great sources of information. Read also part 2