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Individual Development Accounts

by Richard

It all adds up…Have you heard of these accounts before?

Me neither.

I’m surprised something as useful as this program seems to be has been flying under the radar…unheralded and no doubt under used

The idea that the sparked creation of IDAs is both straightforward and obvious:

Low and moderate income earning families have great difficulty in pooling their savings for major life enhancing events such as

  • tuition payments for self education,  and/or the education of their children
  • saving to buy a home or car
  • saving to start a small business

Local non-profit organizations team up with financial institutions to help channel such savings, and most critically, they set up matching contributions to reach the targeted goal.

The most common match rate is 2:1….yes…the good guys put up $2 for every $1 the individual contributes, although match rates can be higher or lower than this ratio.

Programs are set to run from one to five years…so that the goal is always clearly in sight on the event horizon.

The match dollars can come from government agencies, private companies, churches or local charities….and individual donors can get a charitable tax deduction for their contributions.

There is a catch…but it’s a good one.

Recipients will likely be required to participate in continuing education with an emphasis on creating and managing household budgets, the basics of savings and investment, how and when to use credit and planning and saving for retirement.

I was surprised to learn that over 500 IDA programs are already in existence.

Qualification is based on family income, expressed as a percentage of federal poverty guidelines or area median income, to ensure that the program is targeted to those most in need

Those seeking program specifics should check the IDA network website:

http://www.idanetwork.org

If you know someone who would benefit from participation, you should pass this information on.

If you are looking for a charitable venture to support….one that does not burn through the majority of its contributions for expenditures on overhead and fundraising…you should look into this further.

Now….if only there were someway to require our congressional spendthrifts to sit in on these budgeting classes…

Mandatory re-education camps for the fiscally challenged.

An idea whose time has definitely come.

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