Individual development accounts (IDAs) are matched savings accounts designed to help limited-resource individuals save money for goals that enhance long-term financial security such as postsecondary education or job training, home ownership, small business capitalization, and other approved asset uses. Conceptualized in the book Assets and the Poor by Michael Sherraden, IDAs are designed to promote saving and asset accumulation by the working poor. Prior to the introduction of IDAs, those who received public assistance were often penalized for saving because eligibility for benefits was jeopardized.
Common features of IDA programs are as follows:
• A goal-focused savings account started by participants with earned income, maintained at participating financial institutions, and administered by community-based nonprofit programs that recruit participants and provide ongoing case management.
• Regular deposits made by participants to a custodial IDA savings account over a specified period of time, generally one to three years.
• A targeted savings goal, such as education or homeownership, designed to enhance participants’ long-term financial security.
• A structured and supportive learning environment provided by a series of training classes on financial planning and asset-specific (e.g., home ownership and starting a business) topics.
• Matching funding for savings accounts, at varying rates, by third parties, such as businesses and government.
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