Long-Term Follow-Up of Individual Development Accounts: Evidence from the ADD Experiment

Abstract

This report presents findings from the fourth wave of the American Dream Demonstration (ADD) experimental study of Individual Development Accounts (IDAs). The ADD was a set of 14 privately funded local IDA programs initiated in the late 1990s. It was the first large-scale test of IDAs in the United States and used a variety of research methods in order to learn about IDAs. One of these programs, in Tulsa, Oklahoma, was implemented as a random assignment experiment. This report is based on a 10-year follow study of impacts at the Tulsa site.In total, 1,103 low-income participants were surveyed at baseline and randomly assigned to either the treatment or control group. Treatment group members received access to an IDA as well as financial education and case management. The IDA provided matched withdrawals at a 2:1 rate for home purchase and a 1:1 rate for home repair, small business investment, post-secondary education, or retirement savings. Participants who made the maximum matchable deposits throughout the 3 years of the program could accumulate $6,750 (plus interest) for a home purchase or $4,500 (plus interest) for the other qualified uses.In examining the five allowable uses, the study finds some impacts of IDAs on education, especially for males, and on home maintenance and repair 10-years after the program. However, we find no impact on homeownership, businesses, and retirement savings in the follow-up study. The positive findings for education and home maintenance and repair may suggest that IDAs are best suited to support asset purchases that can be accomplished incrementally over a period of time. Targeting IDAs for education and home maintenance and repair may be more effective than applying them to “all-or-nothing” purchases like a house.