Individual development accounts
If someone supporting a family of four on about $35,000 a year can manage to save a big chunk of income, what's stopping the rest of us from saving more?
Participants in the Utah Individual Development Account Network (UIDAN), an asset-building program managed and administered by AAA Fair Credit Foundation, have a household income of about $18,000, on average, yet manage to put aside almost 5 percent of their income each month. In contrast the United States savings rate in 2007 was just 0.6 percent.
To get the match from UIDAN, savers must complete a series of personal financial-management classes, and the money must go to a specific goal such as buying a house, paying for college or starting a small business. For its matched-savings program, the nonprofit uses individual development accounts, or IDAs, an asset-building tool first outlined in "Assets and the Poor," a book by Michael Sherraden, founder of the Center for Social Development at Washington University in St. Louis, Mo.
IDAs give people "access to the tools they need to support themselves and participate in the mainstream economy," said Bob Friedman, who has worked closely with Sherraden. Friedman is the San Francisco-based chairman of Washington-based CFED, a nonprofit focused on expanding economic opportunity.
A safety net, such as welfare, is important but won't get people out of poverty.
"It's economic methadone -- it mitigates the pain but doesn't offer a way out," said Friedman.
That's where IDAs come in. And they seem to work. Savers who participate often continue their financial goal-setting long after they've invested in their initial asset.
"Overwhelming percentages of IDA participants say they're more confident about the future, they take more initiative," Friedman said. "By a six-to-one margin over non-IDA participants, they identify a specific asset goal they are saving for," he said.
In Price, the United Way of Southeastern Utah (UWSEU), Utah State University (USU) and BEAR (Business Expansion and Retention) have combined efforts to provide the IDA program in local communities. UWSEU has invested matching funds into the IDA program and actively markets this program providing individual and group presentations, information and referrals to other programs if an individual does not qualify at the present time for the IDA program and oversees the registration for the classes.
Ellen Surfustini with USU provides the educational piece of the IDA program, facilitating the series of personal financial management classes. Delores Roberts, a VISTA employee with the BEAR, provides the case management portion of the IDA program.
Stories of success, like the one below, are fairly common through the program.
Ben is a student in the University of Utah's three year part-time distance education master's of social work program. He will complete his masters in April, 2009. He works full time as a caseworker for the Division of Child and Family Services. Ben is a native of Utah and moved to Price for the position he has with the state. He and his wife, Charity, have three children. The funding available through UIDAN has made it possible for Ben to complete his master's program, work full time and have his wife stay home with their three small children. Ben is extremely appreciative of what UIDAN has done to help him succeed a lot sooner than he thought he would. He has saved for a year and was able to pay in full this semester from his IDA savings account. When he completes his master's, he hopes to be hired as a therapist, working with children who or have been in foster homes and their families.
UIDAN raises funds to support the operations and match dollars.
"With the generosity of community members, corporations, and foundations, we can continue to expand our work and provide even more matched savings accounts to eligible Utah residents," says Preston Cochrane, President and CEO of AAA Fair Credit Foundation. "Whether you want to sponsor specific accounts, specific goals, or just add to the pool of match money, we need to raise these important funds to ensure we can help all of our participants succeed in their goals and to make the program work.
Each dollar donated will leverage an equal or greater amount of federal or government grant funds to match the savings of low-income individuals participating in UIDAN's matched savings program.