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Individual Development Accounts (IDAs)

Health Factors: Income
Decision Makers: State Government Nonprofit Leaders
Evidence Rating: Insufficient Evidence
Population Reach: 1-9% of WI's population
Impact on Disparities: Likely to decrease disparities

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Description

Individual Development Accounts (IDAs) are subsidized asset accumulation programs for low and moderate income individuals and families. Participants deposit money into an IDA and savings are matched by program sponsors. To retain matching funds, withdrawals from the IDA must be used for qualified expenditures such as education, small business development, or home purchase. Programs are usually run and funded through partnerships between financial institutions and nonprofit organizations that are already providing services to potential participants.

Expected Beneficial Outcomes

Increased asset accumulation
Increased academic achievement

Evidence of Effectiveness

There is insufficient evidence to determine whether Individual Development Accounts (IDAs) promote savings and asset building among participants. Available evidence suggests that IDAs may facilitate modest asset accumulation among low income households, especially those with particularly low wealth (Huang 2009, Richards 2011). In the long-term, some studies find reductions in the likelihood of foreclosure (Urban-Rademacher 2010) and increased educational attainment (Grinstein-Weiss 2013) among participants. Other studies find little significant difference in financial standing between participants and non-participants in the long-term (Mills 2008, CSD-Grinstein-Weiss 2011).

High intensity IDA programs may not be cost-effective means of encouraging saving; an evaluation of a four-year, county level IDA program estimated an average of $3 in program costs for every $1 saved by the 471 participants (WU CSD-Schreiner 2004).

Implementation

United States

There are IDA initiatives in over 500 communities across the United States. IDA legislation has been passed in 35 states, Washington DC, and Puerto Rico (Mills 2008).

Implementation Resources

CBPP-McNichol 2004 - McNichol L, Springer J. State policies to assist working-poor families. Washington, DC: Center on Budget and Policy Priorities (CBPP); 2004. Accessed on November 30, 2015

Citations - Evidence

CSD-Grinstein-Weiss 2011 - Grinstein-Weiss M, Sherredan M, Gale W, et al. Ten-year impacts of Individual Development Accounts on homeownership: Evidence from a randomized experiment. Center for Social Development (CSD). 2011: Working Paper 11-07. Accessed on January 11, 2016
Grinstein-Weiss 2013* - Grinstein-Weiss M, Sherraden M, Gale WG, et al. Long-term effects of Individual Development Accounts on postsecondary education: Follow-up evidence from a randomized experiment. Economics of Education Review. 2013;33:58–68. Accessed on February 5, 2016
Huang 2009 - Huang J. Effects of Individual Development Accounts (IDAs) on household wealth and saving taste. Research on Social Work Practice. 2009;20(6):582-90. Accessed on February 17, 2016
Mills 2008* - Mills G, Gale WG, Patterson R, et al. Effects of Individual Development Accounts on asset purchases and saving behavior: Evidence from a controlled experiment. Journal of Public Economics. 2008;92(5-6):1509-30. Accessed on March 14, 2016
Richards 2011 - Richards KV, Thyer BA. Does Individual Development Account participation help the poor? A review. Research on Social Work Practice. 2011;21(3):348–62. Accessed on May 24, 2016
Urban-Rademacher 2010 - Rademacher I, Wiedrich K, Ratcliffe C, Gallagher M. Weathering the storm: Have IDAs helped low-income homebuyers avoid foreclosure? Washington, DC: Corporation for Enterprise Development (CFED), Urban Institute; 2010. Accessed on May 20, 2016
WU CSD-Schreiner 2004 - Schreiner M. Program costs for Individual Development Accounts: Final figures from CAPTC in Tulsa. Saint Louis: Center for Social Development, George Warren Brown School of Social Work, Washington University in St. Louis; 2004. Accessed on December 12, 2015

Citations - Implementation

Mills 2008* - Mills G, Gale WG, Patterson R, et al. Effects of Individual Development Accounts on asset purchases and saving behavior: Evidence from a controlled experiment. Journal of Public Economics. 2008;92(5-6):1509-30. Accessed on March 14, 2016

Page Last Updated

May 29, 2013

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