Mile High United Way accountholder Stephanie Wooten

A Presentation on IDAs and Asset Building May 2007 NAMHPAC Pre-Conference Workshop – Joint National Conference Emily Appel CFED 777 North Capitol St., NE Suite 800 Washington, DC Note – Emily can no longer be reached at CFED, please contact NAMHPAC, or CFED directly for questions.

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.

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

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.

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

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

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.

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

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

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

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 $ $27,380 3 $34,340 4 $41,300 Net worth test: the net worth of the household cannot exceed $10,000

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 >> IDA Directory

Map of IDA Programs

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

IDA and Asset Building Resources on the Web CFED’s IDAnetwork Center for Social Development New America Foundation