Individual Development Accounts - PowerPoint Presentation

Slide1

Individual Development Accounts

Community Action Partnership of North Dakota

www.capnd.org

Slide2

Community Action Agencies

Slide3

IDA History and Theory

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

Slide4

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

Slide5

Overview of North Dakota IDA Program

Slide6

IDA Overview

Savings accounts matched 2:1 can be used towards the purchase of one of three lasting assets:

Slide7

4:1 Match for first-time home buyers

Slide8

8:1 Match for college students and small business owners

Slide9

Who Qualifies for an IDA?

Slide10

Income Guidelines

Poverty Income Guidelines 2016Number in Household200% of Poverty200% Hourly Wage1$24,311$11.692$32,480$15.623$40,840$19.634$49,200$23.655$57,560$27.676$65,920$31.697$74,280$35.718$82,640$39.73For each additional household member add$8,320$4.00

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

Slide11

Application Process

Complete Application

Submit all required materials

Meet with IDA case manager

START SAVING!

*Required materials include:

Completed Application

Income Verification

Copy of State-Issued ID

Credit Report

Slide12

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.

Slide13

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

Slide14

Financial Literacy Training

Four Cornerstones

Budgeting to Create SavingsDebt Reduction and Asset BuildingConsumer Protection and Financial InstitutionsBuilding a Good Credit Rating

Four Directions

Thrifty Living to Build Your Savings

Investing to Grow Your Savings

Protecting to Secure your Savings

Building a Future with your Savings

Slide15

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

Slide16

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

Slide17

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

Slide18

Results: What we learned from the survey and the interviews

IDA RETURN ON INVESTMENT STUDY

Slide19

Clients

Slide20

IDA Program 2002-2016

North Dakota

Graduates

Savers

Total

Home

62

15

77

Education

109

18

127

Small Business

36

4

40

Total

207

37

244

Slide21

Asset Goal

Slide22

Education Asset

N=38

Slide23

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

Slide24

How the IDA Helped: Paying for College

Slide25

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

Slide26

How the IDA Helped: The Benefits of Attending College

Sense of Accomplishment

Skills

Career

Feeling of Self Worth

Education/More Knowledge

Ability to Plan for the Future

Increased Wages

Personal Growth

The Dream Job I Always Wanted

Improved Chances of Finding Employment

Slide27

The Homeowner

n=23

Slide28

Home Ownership

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

Slide29

How has Life Changed Since Purchasing Home

13 out of the 23 stated that their life has improved since purchasing a house

Slide30

Small Business Ownership/Improvement

n=6

Slide31

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

Slide32

Type of Business

Remodeling Business

Event Planning/Decorating

Chiropractor

Day Spa

Photography

Slide33

What was done with the Extra Revenue Generated

Slide34

How the IDA helped: Small Business

Slide35

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.

Slide36

Overall Changes attributed to IDA

N=82

Slide37

Since Participating in the IDA Program: Financial Situation

Slide38

Since Participating in the IDA Program: What has happened?

Behavior

Managing Money Better

44 (54%)

Spending Habits Improved

36 (44%)

Saving Habits

Improved

44 (54%)

Confidence in

Managing Finances and Planning for Financial Future Improved

38 (46%)

Increased Knowledge about Budgeting and Financial Planning

37 (45%)

Better Understanding of how Credit and Credit Cards

31 (38%)

Better Understanding

of MY Ability to Save on a Limited Outcome

30 (37%)

Confidence

Interacting with Financial Services and Organizations

31 (38%)

Paid

Off Deb

t

28 (34%)

Slide39

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)

Slide40

Improvements

Behavior

No Prior to

Yes Since IDA

Pay Bills on Time

30

+8

Pay Rent/Mortgage

on Time

28

+2

Pay for Medicine and Health Care Needs

44

+12

Make Regular Deposits

into Savings Accounts

49

+21

Reduce my

Overall Household Debt

61

+29

Keep an Emergency Fund

58

+26

Know my Credit Score

53

+27

Make Deposit into Child College Savings

79

+11

Make Deposit into an IRA or Tax Sheltered Annuity

61

+23

Use

a Budget to Monitor Your Spending

51

+26

Slide41

Improvements Continued

Behavior

Yes Prior

No Since the IDA

Make Deposit

into College Savings for Self

74

+11

Use a Pawn Broker

3

-3/0

Claim the Earned Income Tax Credit

53

+9

Used Rapid Tax Refund/ Tax Refund Anticipation Loan

4

-3

Slide42

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.

Slide43

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.

Slide44

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.

Slide45

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.

Slide46

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.

Slide47

Program Recap

Potential participants must income-qualify and be able to make deposits from earned incomeIDA is opened upon acceptance at Bremer Bank and monthly deposits begin immediatelyParticipants work with IDA Case Manager to complete required trainingsUpon 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)

July 12, 2013

Slide48

Motto of IDA Program

Save and Invest

Instead of

Borrow and Spend!

Slide49

Who do I call with questions?

Martha Moe

Program Coordinator

701-232-2452

WEBSITE:

www.capnd.org

EMAIL:

ida@capnd.org