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About Individual Development Accounts (IDAs)
The promotion of thrift continues to be central to the mission of CDCUs. Individual Development Accounts, or IDAs, provide an ideal vehicle for encouraging low-income credit union members to save toward homeownership, self-employment and higher education. Currently, 44 CDCUs around the country participate in the Federation’s IDA program, with more than 400 open accounts.
IDAs are restricted savings accounts that provide incentives to help low-income people save and build assets. Individuals who open an IDA receive matching funds, normally ranging from $1 to $3 for each dollar they deposit into their account. In addition, IDA programs normally include support services such as budget counseling and homeownership and entrepreneurial training to help participants achieve their goals. When the individual has accomplished the savings goal they had initially set, they may withdraw all of the account to spend on that goal, including the matching funds granted by the CDCU or an outside organization. While saving a large amount of money can be difficult for low-income people with pressing immediate expenses, the personal and practical achievement of attaining a savings goal can be a pivotal experience.
Federation IDA Program History and Information
In June, 1996 the Federation began a study of savings patterns in low-income communities. The purpose of the study was to determine the reasons why people save, what barriers they face when trying to save and what incentives would help people to increase savings levels. This research is currently being used to design a program to help CDCUs bring IDAs to their members.
The first stage of the study looked at average savings levels among CDCU members and tested how savings is influenced by factors such as credit union size and age, income level in the community and products and services offered. The second and third stages of the study surveyed CDCU managers and members to determine reasons why people save and barriers and obstacles to saving. Based on this information, the Federation has outlined model IDA programs to help member credit unions to decide on appropriate match amounts and allowable uses of IDA funds. These model programs will be featured in an IDA Manual for implementation in community development credit unions. Copies of the two phases of the Federation’s research are available upon request.
Weed and Seed IDA Demonstration Pilot Project
In 2005 the Federation received a grant from the Department of Justice Community Capacity Development Office to help establish Individual Development Account (IDA) programs in ten “Weed and Seed” sites across the country. The Federation will be responsible for providing technical assistance to help Weed and Seed sites design effective IDA programs and submit qualifying applications for AFI funding no later than June, 2006.
Weed and Seed began in the early nineties as a strategy to prevent, control and reduce violent crime, drug abuse, and gang activity in targeted high-crime neighborhoods across the country. The strategy is to increase enforcement while “seeding” the sites with human services that lead to neighborhood revitalization. Today there are more than 320 sites across the country, ranging in size from several city blocks to 15 square miles.
In recent years, Weed and Seed sites have increased their emphasis on asset-building initiatives to increase the economic stability of their communities. Most sites now incorporate VITA/EITC, financial education, or homebuyer assistance into their strategy, and some are already implementing IDAs. The current demonstration project is focused specifically on homeownership IDAs to test the impact of a successful IDA program on community stability and revitalization.
Additional Information
For more information about the Federation's technical assistance for the Weed and Seed IDA Demonstration Program, please contact Terry Ratigan at tratigan@cdcu.coop or (800) 437-8711 x251.
