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 to an IDA can be used to purchase a house, pay for education costs, 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. By contributing to the monthly savings of working-class American families, IDAs open doors to additional education, homeownership, bigger retirement funds, and better business opportunities.
IDA bank account
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 of 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 purpose. 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).
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.
In general, IDAs are managed by local community organizations, and IDA accounts are usually held at local financial institutions, for example, a bank or a credit union. Every participant will receive education on budgeting and saving, but also topics like how to clean up credit. The programs’ length or the sort of training that participants receive may vary.
When the time has come to use the IDA fund, the IDA administrator will write a check to the recipient, such as a college, a title company, or a business equipment vendor, and you’re all good to go. It’s not only that your IDA deposits will be matched, so your account will grow rapidly, and you will also get financially experienced in the process.
While you build up your IDA savings account to reach your goals, you will also be learning how to deal with money, how to set up a financial plan, and how to develop your finance skills.
Later, you will still benefit from and develop these skills even if you have reached your initial goals. All across America, IDAs are set up to help participants. This way, they can build their assets, increase savings rates, and connect to people in the economic mainstream. Because all IDA programs are different, they all have their own different rules and requirements, yet most IDA programs are following similar rules and steps.
First, you will need to attend an orientation session where you will be explained how an IDA works, how important asset building is, and you will learn about the importance of continual savings in your life. Following this orientation session, you need to fill out an application form to express your intent to become the holder of an IDA account.
The application form asks you about your income, family members, education, debt position, and so on. Sad to say, there are generally lots of people like you who qualify for an IDA and would like to have such an account, but there are just a limited number of available accounts. So if you are not accepted into the IDA program on the first try, don’t get disappointed. Just apply again.
In case you do get accepted into the IDA program, you can open an IDA account with the financial partner of the program, usually a credit union or a local bank. You must sign a commitment that states how much you will save each month. For the duration that you are participating in the IDA program, you will receive periodic statements on your savings level, the matching contribution level, and the amount of interest that your account has made.
Upon enrolling in the IDA program, IDA staff members will contact you to set up a savings plan. The staff will also help you to deal with your credit, analyze your income and spending habits, and help you to set a monthly saving schedule that is in line with what you (and your family) are able to save. You will also need to attend financial education lessons where you’ll be taught all sorts of things related to investing, saving, banking, as well as money-management skills.
By the time you have saved a certain amount in your IDA account, you may ask for a withdrawal of the funds. You need to come up with a suitable purpose for the money, for example, tuition for college, and the program administrators will review your request and decide whether your purpose is legitimate. If your withdrawal request gets approved, a check to the organization, for example, a college, is written by the IDA administrator to accompany your check for your part of the account.