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Individual Development Accounts

Learn about Individual Development Accounts (IDAs) and how they empower individuals in North Dakota to save, invest, and secure lasting assets like education, homes, and small businesses.

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Individual Development Accounts

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  1. Individual Development Accounts Community Action Partnership of North Dakota www.capnd.org

  2. Community Action Agencies

  3. IDA History and Theory Individual Development Accounts (IDA’s) have existed across the United States since 1998 Founded by Michael Sherraden, wrote “Assets and the Poor” People are trapped in a cycle of consumption of assistance programs Need long-term solutions to poverty rather than maintenance efforts Spearheaded the American Dream Demonstration Showed people with low incomes can and do save

  4. History of IDAs Assets for Independence Act of 1998 • Had bi-partisan support • Established Federal support of IDAs • Defined program guidelines 40 states have passed IDA legislation (including ND!) 548 AFI IDA initiatives nationwide at end of FY2009 • More than ½ of AFI projects are administered by CAAs, human service organizations, and community development corporations • Match rates and match funds vary from $160-$4,500; average is $1,631

  5. Overview of North Dakota IDA Program

  6. IDA Overview • Savings accounts matched 2:1 can be used towards the purchase of one of three lasting assets:

  7. 4:1 Match for first-time home buyers

  8. 8:1 Match for college students and small business owners

  9. Who Qualifies for an IDA?

  10. Income Guidelines *Note: If a participant is claimed on a person’s taxes, the household income of the family claiming the person must be used

  11. Application Process START SAVING! Meet with IDA case manager Submit all required materials Complete Application *Required materials include: Completed Application Income Verification Copy of State-Issued ID Credit Report

  12. Once a person is enrolled…. • Open a custodial account at Bremer Bank • Immediately begin making monthly deposits from earned income • Complete 10 hours of financial literacy training • Work with an IDA Case Manager throughout the duration of their time in the program • Are eligible for match dollars after a minimum of six months of savings and completed trainings • Two IDA accounts are allowed per household: Meaning two family members can participate at one time, or one household member can participate twice. They can save for the same asset.

  13. IDA Savings Requirements • Monthly deposits from earned income • Two-year program • Six months of regular savings AND completion of trainings before any withdrawals can be made

  14. Financial Literacy Training Four Cornerstones Four Directions Thrifty Living to Build Your Savings Investing to Grow Your Savings Protecting to Secure your Savings Building a Future with your Savings • Budgeting to Create Savings • Debt Reduction and Asset Building • Consumer Protection and Financial Institutions • Building a Good Credit Rating

  15. Asset-Specific Training 8 hours offered, with the potential for more if interested • Offered by community partners General Topics Covered: • Affordability of homeownership • Free Application for Federal Student Aid (FAFSA) • Career and education exploration • Developing a business plan • Determining marketing strategies

  16. Asset Purchase Process • Allowable after completion of trainings and at least 6 months of regular savings • Participant notifies IDA Case Manager to initiate process • Participant savings in IDA are matched 4:1 for first-time home buyers or 8:1 for college students and small business owners • Check is issued directly to the vendor Under no circumstances does the participant have access to the match funds • Multiple withdrawals allowed, maximum of 3 • Assets must be purchased in North Dakota

  17. IDA Participants in ND • The average age is 20-27 • The average income was $14,112.88 • Most common asset saved for is education • 90% indicated they had more control over household finances after completing the program • 94% learned new financial management skills • 81% said they were more likely to use bank services and products

  18. Results: What we learned from the survey and the interviews IDA RETURN ON INVESTMENT STUDY

  19. Clients

  20. IDA Program 2002-2016

  21. Asset Goal

  22. Education AssetN=38

  23. Current Enrollment Status • 18 of the 38 IDA holders are currently in college • 19 of 20 IDA holders graduated • While the majority of IDA holders (33, 87%) said they would have gone to school without IDA support, 5 IDA holders (13%) said they WOULD NOT HAVE • All colleges in North Dakota were represented including Tribal Colleges

  24. How the IDA Helped: Paying for College

  25. How has the IDA Helped: Changes in Employment Status Since Attending College

  26. How the IDA Helped: The Benefits of Attending College Sense of Accomplishment Education/More Knowledge Personal Growth Career Ability to Plan for the Future Feeling of Self Worth Increased Wages Skills The Dream Job I Always Wanted Improved Chances of Finding Employment

  27. The Homeownern=23

  28. Home Ownership Property Taxes spread from $42 to $2,800 with the mode being about $1,500

  29. How has Life Changed Since Purchasing Home 13 out of the 23 stated that their life has improved since purchasing a house

  30. Small Business Ownership/Improvementn=6

  31. Why the IDA? All but 1 IDA holder still owned the business that was started/improved on with IDA funds The one person has not started the business at the time of survey

  32. Type of Business Day Spa Remodeling Business Event Planning/Decorating Photography Chiropractor

  33. What was done with the Extra Revenue Generated

  34. How the IDA helped: Small Business

  35. Small Business-The IDA Holder I would not have been able to purchase the tools that I did, had not this program been available. I have used these tools to do many activities, which range from my small business, personal use, and helping others. It gave me the opportunity to bring in new services to the area which in return helped grow my business.

  36. Overall Changes attributed to IDAN=82

  37. Since Participating in the IDA Program: Financial Situation

  38. Since Participating in the IDA Program: What has happened?

  39. Public Assistance • 23 IDA Holders were on Public Assistance prior to IDA • 11 out of 23 were on Public Assistance at the time of the survey (Spring 2014)

  40. Improvements

  41. Improvements Continued

  42. Power of the IDA Program:The clients in their own words • The IDA program has impacted me and my family in a positive way. I have been able to learn how to save money by watching my spending habits, and by noticing that it is possible to put even a small amount of money aside. • It was a positive experience so help me get through graduate school so that I can better my living situation and obtain a career that I always wanted to help support my family.

  43. Power of the IDA Program:The clients in their own words • It helped us save when we didn't think we could. It gave us the feeling that we could do better and be home owners. • I got used to putting money away each month, and it's a habit I've kept up to this day. I now have a savings account that I use for extraordinary circumstances (like a car repair) where I would have used a credit card previously. • It helped me buy my first home for my daughter and I to live in. I never would have been able to do that without the IDA program.

  44. Frequently Asked Questions I’m currently in High School, can I participate? • Yes, but you have to be at least a Junior and have parental consent. You must also be able to make deposits from earned income. Even though I qualify now, what happens if my income increases? - Once you have been proven eligible and accepted into the program, eligibility is “locked in.” Participants need only be income-eligible at time of enrollment and acceptance.

  45. Frequently Asked Questions Do I have to currently be employed to qualify for an IDA? • Yes, federal regulations clearly state that deposits into an IDA must come from earned income. Where are savings into the IDA deposited? - Accounts are held at Bremer Bank all over North Dakota. Accounts do not incur any service fees and do accrue interest.

  46. Frequently Asked Questions I attend a two-year college, can I participate? • Absolutely! The IDA program can be utilized at any accredited post-secondary institution in North Dakota towards an Associate, Bachelor, Master, or Post-Doctorate degree. The IDA program sounds too good to be true. What is the catch? Is it a loan? • It’s not too good to be true! The program is an excellent opportunity to accumulate a lasting asset. There really is no catch and nothing has to be paid back. • The purpose of the program is to teach people how to save and invest their money rather than borrow and spend.

  47. Program Recap • Potential participants must income-qualify and be able to make deposits from earned income • IDA is opened upon acceptance at Bremer Bank and monthly deposits begin immediately • Participants work with IDA Case Manager to complete required trainings • Upon completion of trainings and demonstration of 6 months consecutive savings, participants are eligible to receive a match to their savings towards the purchase of their approved asset (4:1 for home purchase, 8:1 for college and small business)

  48. Motto of IDA Program Save and Invest Instead of Borrow and Spend!

  49. Who do I call with questions? Martha Moe Program Coordinator 701-232-2452 WEBSITE: www.capnd.org EMAIL: ida@capnd.org

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