If you find yourself in a difficult financial situation there are three things you need to escape: First, hope for a better future; second, the knowledge and skills to get there; and, third, some extra cash to get started.  Individual Development Accounts (IDAs) are wonderful tools for those of modest means because they address each of these needs.

What is an IDA?

IDAs are matched savings accounts sponsored by nonprofit organizations that help people with low or moderate income save money.  In my last post we discussed taking advantage of company matches for retirement savings.  Unfortunately many people with low or moderate income do not have jobs that offer this benefit.  IDAs help fill this void by matching savings for those who qualify, and the matches are often quite generous. 

For example, the IDA plan in my home state of Utah will contribute $3 to an IDA for every $1 saved by participants up to a maximum of $1,500.  This means if you can save the maximum of $1,500 the program will contribute $4,500, giving you a total of $6,000.  This money can be used as a down payment on a home, to pay for education expenses, or to start or grow a small business.  The program requires monthly saving from participants of from $15 to $62.50 and you have up to three years to grow your savings.  Each plan is different, so you will have to research plans available in your state to determine specifically what they offer. 

Do You Qualify for an IDA? 

To qualify for an IDA you have to meet certain income and net worth requirements and agree to participate in personal finance training classes.  Again using the plan available in my home state of Utah as an example, some of the requirements to qualify are: 

• Make less than specified income ceilings, which range from $22,980 for a single person to $79,260 for a family of eight.  A married couple without children would need to make less than $31,020 to qualify and a family of four could make up to $47,100. 
• A household net worth of less than $10,000. 
• Participation in a personal finance and money management workshop series provided by the program.  

Requirements are different for each program, and vary based on cost of living in different locations, so it will take a little research to determine if you qualify.    

Where to Get More Information

A great website to learn more about IDAs is www.cfed.com.  This is the website for the Corporation for Enterprise Development, a national nonprofit organization whose goal is to empower “low and moderate-income households to build and preserve assets by advancing policies and programs that help them achieve the American Dream.” 

When you get to the website, select the “Programs” menu at the top of the home page and then select “Individual Development Accounts” from the dropdown list.  You can explore this page to learn more about how IDA’s work.  If you decide this is something you want to pursue, clink the link for “IDA Program Directory” at the bottom of the page.  This will help you locate an IDA provider near your home.  

What Are You Waiting For!

An IDA is a fantastic way to jumpstart your savings, so if you think you might qualify it is worth doing a little research to find out.  If you don’t qualify, but know someone who might, please share this information with them.  You just might help provide hope, training, and some extra cash to someone who could really use it.