www.cfed.org

Mile High United Way accountholder

Stephanie Wooten

A Presentation on IDAs and Asset Building May 2007NAMHPAC Pre-Conference Workshop – Joint National Conference

Emily AppelCFED

777 North Capitol St., NE Suite 800Washington, DC 20002

eappel@cfed.org

Note – Emily can no longer be reached at CFED, please contact NAMHPAC, or CFED directly for questions.

www.cfed.org

CFED

Our Mission: Ensure that every person can participate in, contribute to, and benefit from the economy.

Strategy: Expand asset building and economic opportunities by bringing together community practice, public policy, and private markets in new and effective ways.

Method: Identify new ideas, find what works, help new ideas reach scale, and foster new markets to achieve greater economic impact.

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Why assets matter

Assets provide benefits that income alone cannot provide, such as a financial cushion and a psychological orientation toward the future and toward one’s children

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But Americans are asset poor

Nearly one in five households owes more than it owns (21 million).

One in four female-headed households has zero or negative net worth.

One in three minority-headed households has zero or negative net worth.

One in four families (26 million) does not own enough to subsist at the poverty level ($4,875 in income) for three months.

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Disability and Asset Poverty One-third (34%) of adults with disabilities live

in households with total income of $15,000 or less compared to only 12% of those without disabilities

NJ program: 90% of clients rely on SSI/SSDI, and those that are employed take home only $8000-$10,000/year

10% of people with disabilities own homes compared to 71% of those without disabilities

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Disability and Asset Poverty (cont’d) 58% of people with disabilities are asset poor

(do not have enough resources to live at the federal poverty level for three months)

54% of people with disabilities have no savings accounts, and 69% have no checking accounts

Even if they are employed, it is assets, not income, that allow people to move out of poverty and achieve economic independence

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Federal Government Response

The federal government spends $362 billion a year to promote asset building.

HOWEVER, that number is highly skewed to upper-income citizens.

The top fifth (those with household incomes greater than $80,000) received the vast bulk (88.7%) of the asset-building benefits.

In contrast, the rest of the population shared 10.5% of the tax benefits, and the lowest 60% of households got less than 3% of the benefits.

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What is an Individual Development Account?

Individual Development Accounts (IDAs) are matched savings accounts designed to promote asset building and change savings behaviors

Participation involves at least 10 hours of general financial education, plus additional asset-specific education

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What can IDAs be used for?

Primary uses of IDAs: Homeownership – downpayment

and/or acquisition costs Microenterprise – seed capital for

entrepreneurs to start up their own businesses

Education – tuition for post-secondary education for accountholder or dependent

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Benefits of IDAs In addition, the IDA program gives families the

skills to manage their money and save for the future, through financial and economic education

Financial education is training designed to help families acquire the information and skills necessary to take control of their personal finances

Financial education increases savings rates among adult IDA holders

Access to other financial supports, like credit counseling and tax preparation

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IDA Income Qualification(AFI Guidelines)

IDA participants must meet each of the following requirements:

Income test: household income must be below 200% of the Federal Poverty Level Family Size Gross Income

1 $20.420 2 $27,380 3 $34,340 4 $41,300

Net worth test: the net worth of the household cannot exceed $10,000

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Who operates IDA programs?

IDAs are primarily offered by nonprofits that do the recruitment, casework, and financial education, in partnership with financial institutions that can hold the accounts

Currently there are over 500 programs in the US, serving 30,000 accountholders

Find updated list of programs at www.idanetwork.org >> IDA Directory

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Map of IDA Programs

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Other components of a comprehensive asset building and financial education agenda

Improving and expanding access to financial education

Increasing affordable homeownership opportunities Promoting state-level Earned Income Tax Credit

(EITC) legislation and expanding use of the federal EITC

Creating new savings opportunities for higher education

Supporting children’s savings accounts Increasing access to retirement savings

opportunities Implementing anti-predatory lending measures

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IDA and Asset Building Resources on the Web

CFED’s IDAnetwork www.idanetwork.org

Center for Social Development http://gwbweb.wustl.edu/csd/

New America Foundation www.assetbuilding.org