Individual Development Account Program Research Articles

Professionals’ Perceptions of Food Insecurity Among Their Low-Income Clients

This research examines the awareness of social service professionals of the food security of low-income families in a community-based savings program. Based on survey data of 65 community agencies in seven states that offer the Individual Development Account (IDA) program, the study investigates program providers’ awareness of the food security of IDA program participants. Second, this study presents IDA program provider activities to alleviate food insecurity and summarizes their opinions about how food insecurity could be prevented among their program families. Results show that providers were aware that families did not have enough of the kinds of food they want to eat. This perception was most strongly related to IDA programs with longer durations. Program families’ reports of their children’s food insecurity aligned well with the extent of food hardship reported by the program providers. Access to food and nutritional wellness services was considered most relevant for alleviating food insecurity. Financial security, access to community resources, and direct access to food and family support networks were considered important factors for protecting families from the threat of hunger. Research is needed to identify the role of community organizations that do not provide nutrition assistance for helping low-income families overcome food hardship.

Assessment of a State TANF Funded IDA Initiative: A Case Study

Individual development accounts (IDAs), wealth-building programs for the working poor, have existed since the late 1980s. Current research suggests that IDA programs benefit families while contributing to local and state economies. This program evaluation assessed the impact of one state Temporary Assistance for Needy Families (TANF)-funded IDA initiative. Quantitative and qualitative data were collected from four agencies chosen using cluster sampling across the state. Agency programmatic and participant data from the last year of operation (N = 160) were examined. Agencies also provided contact information for three participants who had graduated and three who exited the program prematurely in the past year of operation. In person, interviews were held with agency directors (n = 6) and IDA participants (n = 11) were interviewed by telephone. Results indicate that 69% (n = 111) of IDA enrollees successfully completed the program. IDA participants who exited the program prior to completion also expressed benefits associated with the time in which they were involved. Programmatic and individual benefits and challenges reported guide recommendations for improving IDA marketability, participant outcomes, and organizational performance rates. A critical implication of the findings is the need to expand the use and design of IDA programs legislatively to better serve historically oppressed and working poor families more effectively.

A Cost-Benefit Analysis of Tulsa’s IDA Program: Findings from a Long-Term Follow-Up of a Random Assignment Social Experiment

This report presents findings from a cost-benefit analysis of the Tulsa Individual Development Account (IDA) program, a demonstration program that was initiated in the late 1990s and is being evaluated through random assignment. The key follow-up data used in the evaluation was collected around 10 years after random assignment, about six years after the program ended. The results imply that, during this 10-year observation period, program participants gained from the program and that the program resulted in net costs to the government and private donors, and that society as a whole was probably worse off as a consequence of the program. The report examines in some detail whether these findings are robust to a number of different considerations, including the assumptions upon which the results depend, uncertainly reflected by the standard errors of the impact estimates used to derive the benefits and costs, and omitted benefits and costs, and concludes that they are essentially robust. For example, a Monte Carlo analysis suggests that the probability that the societal net benefits of the Tulsa program were negative during the observation period is over 90 percent and that the probability that the loss to society exceeded $1,000 is 80 percent. Further analysis considered benefits and costs that might occur beyond the observation period. Based on this analysis, it appeared plausible, although far from certain, that the societal net benefits of the Tulsa program could eventually become positive. This would occur if the program’s apparent positive net impact on educational attainment generates substantial positive effects on the earnings of program participants after the observation period ended. However, there was no evidence that the educational impacts had yet begun to produce positive effects on earnings by the end of the observation period.

Individual Development Accounts and Post-Secondary Education: Evidence from a Randomized Experiment

This paper presents evidence from a randomized field experiment testing the impact of a 3-year matched savings program on educational outcomes 10 years later. We examine the effect of an Individual Development Account (IDA) program on educational enrollment, degree completion, and increased education level. The IDA program, which ran from 1998 to 2003 in Tulsa, Oklahoma, provided low-income households with financial education and matching funds for qualified savings withdrawals, including a 1:1 match for educational uses. We find a significant impact on education enrollment and positive, but non-significant impacts on degree completion and increase in level of education. We also examine the interaction between gender and treatment assignment and find that the IDA had a strong positive effect on increased educational attainment for males, but not for females.

Drop-Out from Individual Development Accounts: Prediction and Prevention

Abstract Individual Development Accounts (IDAs) provide matches for savings by the poor used to build assets. But IDAs cannot help if participants drop out. What predicts drop-out? For IDAs in the American Dream Demonstration, drop-out is less likely if participants already own some assets. In contrast, income and welfare receipt are not linked with drop-out. Drop-out is strongly associated with aspects of IDA design such as match rates, time caps, and the use of automatic transfer. Because drop-out can be predicted, IDA programs can keep costs down while targeting preventative assistance to the most at-risk enrollees. © 2005 Academy of Financial Services. All rights reserved. JEL classifications: C53; 138; G21; O16 1. Introduction Development-i.e., sustained improvement in well being-requires saving to build human, financial, social, and physical capital. Many U.S. policies use tax breaks to subsidize saving, but tax breaks are weak incentives for poor people (Woo, Schweke, & Buchholz, 2004; Seidman, 2001; Howard, 1997; Sherraden, 1991). Individual Development Accounts (IDAs) are a new policy instrument designed to help the poor build assets (Sherraden, 1988). Instead of tax breaks, IDAs provide matches for savings used to build human capital (via post-secondary education), physical capital (via home purchase), or business capital (via micro-enterprise). IDAs also build human capital via financial education and social capital via support from program staff. Saving is difficult for anyone, and it is especially difficult for the poor because they already have lower consumption, they have fewer opportunities to increase income, they have fewer existing assets available to shift into IDAs, and they suffer more frequent shocks to income and expenses. Thus, some IDA participants drop-out, saving little or nothing. For example, 48% of the 2,350 participants in the American Dream Demonstration (ADD) dropped with net IDA savings of less than $100. Drop-out is costly all around; IDA programs lose their investment in participants, and participants lose potential matches. Drop-outs may also become discouraged with saving in general. Based on the characteristics of participants and on aspects of IDA design, this paper attempts to predict drop-out and to suggest ways to prevent it. Participants are less likely to drop out if they already have assets, whether human (education or age), financial (checking accounts), physical (homes or cars), or social (marriage). In contrast, participants with debt are more likely to drop out. Unlike assets and debt, income and receipt of welfare are not associated with drop-out. Overall, asset poverty-but not income poverty-is linked with greater risk of drop-out. Aspects of IDA design also predict drop-out. This is useful for prevention; even if policy cannot change participant characteristics, it can change IDA design. In particular, drop-out risk can be reduced by setting higher match rates, helping participants set up automatic transfers to their IDAs, and increasing the number of months eligible to make matchable deposits. This paper first describes IDAs in ADD. It then reports on a Probit regression that predicts drop-out based on participant characteristics and aspects of IDA design. After checking the model's profiling accuracy, the final section presents a summary and discusses implications for saving and asset building in general. 2. IDAs in ADD The American Dream Demonstration (ADD) ran from 1997 to 2003 at 14 IDA programs across the United States. ADD was open to people with household income under 200% of the federal poverty guideline. One-half of participants were below 100% of poverty, and one-fifth was below 50%. Compared to the general low-income population, IDA participants were more disadvantaged in that they were disproportionately female (80%), African American (47%), and/or not married (75%) (Sherraden et al. …

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

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.

Testing strategies to increase saving in individual development account programs

A series of randomized field experiments tests whether saving rates in a federally funded, matched, savings program for low-income families – the Individual Development Account program – can be improved through insights from behavioral economics. We test the impact of: (a) holding savers accountable for making savings deposits, (b) increasing the frequency with which deposits are made, and (c) introducing a lottery-based incentive structure. We find small, positive effects of the frequency and lottery treatments on cumulative savings. We investigate reasons for the modest effects of the treatments using interviews with study participants.

Savings Program Participation and Outcomes for Hispanics

ABSTRACTLow- and moderate-income Hispanics in the United States have traditionally experienced few institutional incentives for savings and asset development and have instead encountered many disincentives. The authors provide a brief review of the various enticements and deterrents for savings and wealth development for traditionally underrepresented groups, with a focus on Hispanics. One of the most recent savings initiatives for low- and moderate-income individuals involves dedicated savings accounts, also known as Individual Development Accounts (IDAs). This study was designed to examine whether IDA program completion supports asset development over time for Hispanics. Results indicate that while there are no statistically significant differences in asset growth between IDA completers and non-completers, IDA program completers did experience more growth on all asset measures. The authors provide suggestions on how to close the racial and ethnic wealth gap for low- and moderate-income Hispanic individuals and households.

Testing Strategies to Increase Saving and Retention in Individual Development Account Programs

In a series of field experiments we test whether saving and retention rates in a federally funded, matched savings program for low-income families – the Individual Development Account (IDA) program – can be improved through the introduction of program features inspired by behavioral economics. We partnered with eight IDA programs across the U.S. who agreed to randomly assign participants to different experimental conditions. We test the impact of four revenue-neutral changes in key program features: a) holding savers accountable for making savings deposits through phone calls before and after the deposit deadline, b) an increase in the frequency with which deposits are made from monthly to bi-weekly, c) the introduction of a lottery-based incentive structure, whereby match rates are determined in part by a lottery at the time of each deposit, and d) an increase in the savings match from $2 for every $1 saved to $4 for every $1 saved when half of the savings goal was reached. None of our four interventions had the desired effect of increasing savings. To explain the null findings, we speculate that liquidity constraints, rather than cognitive biases, were the primary impediment to saving.

The Effectiveness of Financial Literacy Instruction: The Role of Individual Development Accounts Participation and the Intensity of Instruction

We examine improvements in financial knowledge for 8th-grade participants in our financial fitness camp, part of our multifaceted financial literacy program. Eighty-three students enrolled in the camp, and 59 had individual development accounts (IDA). We address several issues raised in the literature by focusing on low-income, predominantly Hispanic students, varying the treatment intensity, comparing outcomes for students in our IDA program with those who are not, addressing the potential endogeneity of IDA participation, and testing for selection bias. Financial knowledge increased by approximately 12 percentage points from camp participation. Standardized Language Arts scores, rather than treatment intensity or IDA participation, most affected gains in financial knowledge. There was no evidence of selection bias. Parents with high “present bias” were less likely to enroll their students in the camp, implying that integrating financial literacy education in the regular school curriculum will better serve students in such families.

Saving for post-secondary education in individual development accounts

Low-income people have less access to opportunities for post-secondary education, and the welfare reform in 1996 further limited access for welfare recipients. Since welfare reform, there has been an increasing interest in strategies meant to enhance the well-being of low-income people through and the development of human capital. In this study, we examine how low-income people saved for post-secondary in Individual Development Accounts (IDAs) in a nationwide demonstration. IDAs provide matches for savings used primarily for home purchase, microenterprise, and post-secondary education. We examine how savings outcomes differed between participants who intended to use their savings for post-secondary and other participants. We also look at how these differences in savings outcomes were associated with difference in participant characteristics and in IDA design across different programs in the demonstration. Results indicate that the savings outcomes of education savers were different from other participants. Furthermore, savings for post-secondary moderated some relationships between savings outcomes and other characteristics of participants and of IDA programs. Implications are discussed for policy and social-work practice for using IDAs to promote human-capital development by low-income people. Keywords: post-secondary education, individual development accounts, assets building, welfare reform ********** Both theory and empirical evidence suggest that has a wide variety of positive economic and social effects on individuals, families and society as a whole (Becker, 1993; Beverly & Sherraden, 1997; Center for Women Policy Studies, 2002). Furthermore, the labor-market returns to have increased since the early 1970s (Mishel, Bernstein & Schmitt, 1997; Mishel & Burtless, 1995), and the rise in earnings inequality during the past two decades is closely related to differences in educational attainment (Amott, 1994; Bernhardt & Dresser, 2002). In the meantime, despite the fact that the average level of has increased over the years for both men and women, low-income people and other disadvantaged groups have faced decreasing access to opportunities for post-secondary (Mortenson, 2000). Among the many factors contributing to low access is inadequate financial resources (Boldt, 2000; Gittell, Gross, & Holdaway, 1993). In particular, the increasing costs of college and cuts in need-based financial aid have made post-secondary less affordable for many low-income people (Choitz & Widom, 2003; Mortenson, 2000; Sherraden, 1991). The welfare reform of 1996 has focused on work requirements, further limiting access to post-secondary for welfare recipients. Low-income people may need to put short-term needs ahead of investment in their long-term development of human capital, and it is important for social policy to help them save and invest for their future education. Individual Development Accounts (IDAs) are an approach to help low-income people save and accumulate financial assets for post-secondary education. IDAs are targeted to low-income people and provide incentives and an institutional structure conductive to saving (Schreiner, et al., 2001). IDAs provide participants with matches for savings used for home purchase, microenterprise, and post-secondary education. This paper investigates the following questions: Do IDA participants who intend to use their savings for post-secondary have different savings outcomes than other IDA participants? And if so, what demographic factors and program-design characteristics are associated with the differences? Answers to these questions may provide lessons that will help guide modifications to IDA policy and program design in ways that might improve savings outcomes for those intending to use their IDA for post-secondary education. …

Effects of an Individual Development Account Program on Retirement Saving: Follow-up Evidence From a Randomized Experiment

We examine the 10-year follow-up effects on retirement saving of an individual development account (IDA) program using data from a randomized experiment that ran from 1998 to 2003 in Tulsa, Oklahoma. The IDA program included financial education, encouragement to save, and matching funds for several qualified uses of the saving, including contributions to retirement accounts. The results indicate that as of 2009, 6 years after the program ended, the IDA program had no impact on the propensity to hold a retirement account, the account balance, or the sufficiency of retirement balances to meet retirement expenses.

Savings for Survivors: An Individual Development Account Program for Survivors of Intimate-Partner Violence

ABSTRACTSurvivors of domestic violence often remain in abusive relationships due to limited economic resources, economic dependence on an abusive partner, and economic abuse. Viewing women who have experienced domestic violence as “survivors” suggests that when provided access to appropriate resources, they will seek help and utilize such resources allowing them to increase their stability and potentially escape an abusive partner. Assets have been shown to have a variety of positive associations with a wide range of economic, social, and psychological outcomes. Economic initiatives, such as financial education and individual development accounts (IDAs), aimed toward survivors of domestic violence are on the rise. However, to date, there are few studies. Data on IDA activity, including savings rates, withdrawals, and asset purchases, for 125 women who participated in an IDA matched-savings program for survivors of intimate-partner violence were examined. Approximately 2/3 of women reached their savings goal and 76% made at least 1 matched-savings withdrawal and asset purchase. Results suggest survivors can be successful savers and purchase assets that may contribute to their economic stability. Implications are discussed, including the need for long-term studies to examine how participation in a matched-savings program affects women's well-being, safety, and future experiences of intimate-partner violence.

Matched Savings Account Program Participation and Goal Completion for Low-Income Participants: Does Financial Credit Matter?

ABSTRACTAsset-building programs, such as Individual Development Account (IDA) programs within social service agencies, assist low-income employed clients in building credit, purchasing affordable assets, and gaining wealth. This longitudinal exploratory study examines the credit outcomes of IDA programs to add to the knowledge concerning the effects of IDAs as an asset-building tool. Data were analyzed using a convenience sample of IDA participants and nonparticipants (N = 164), and the results indicated that initial credit score and history are associated with program participation. However, results also suggested that initial credit score is not a meaningful indicator of program completion, time to completion, or type of asset purchased for participants. Those who completed the IDA program within 2 years experienced the highest credit gains. Future research with larger samples is needed to further assess the impact of credit on program participation and completion and on whether credit gains are sustained.

A cost-benefit analysis of Tulsa’s IDA program

This article presents findings from a cost-benefit analysis of the Tulsa Individual Development Account (IDA) program, a demonstration program that was initiated in the late 1990s and is being evaluated through random assignment. The program put particular emphasis on using savings subsidies to help participants accumulate housing assets. The key follow-up data used in the evaluation was collected around 10 years after random assignment, about 6 years after the program ended. The results imply that, during this 10-year observation period, program participants gained from the program and that the program resulted in net costs to the government and private donors, and that society as a whole was probably worse off as a consequence of the program. The article examines in some detail whether these findings are robust to a number of different considerations, including the assumptions upon which the results depend, uncertainly reflected by the standard errors of the impact estimates used to derive the benefits and costs, and omitted benefits and costs, and concludes that they are essentially robust. For example, a Monte Carlo analysis suggests that the probability that the societal net benefits of the Tulsa program were negative during the observation period is over 90% and that the probability that the loss to society exceeded $1000 is 80%. Further analysis considered benefits and costs that might occur beyond the observation period. Based on this analysis, it appeared plausible, although far from certain, that the societal net benefits of the Tulsa program could eventually become positive. This would occur if the program’s apparent positive net impact on educational attainment generates substantial positive effects on the earnings of program participants after the observation period ended. However, there was no evidence that the educational impacts had yet begun to produce positive effects on earnings by the end of the observation period.

Evaluation Design for the Next Phase of the Assets for Independence Program: Final Literature Review

Based on our review and synthesis of the individual development account (IDA) literature, findings in this this report include that IDA accounts (in the short-term, five years after program entry) help low-income families become homeowners, start or expand a business, or pursue secondary education. Studies to date have found no relationship between IDA program participation and net worth. The report reviews empirical evidence on the effect of IDA program participation and project design features on outcomes and highlights remaining gaps in the literature.

Long-term effects of Individual Development Accounts on postsecondary education: Follow-up evidence from a randomized experiment

This paper presents evidence from a randomized field experiment testing the impact of a 3-year matched savings program on educational outcomes 10 years after the start of the experiment. We examine the effect of an Individual Development Account (IDA) program on (1) educational enrollment, (2) degree completion, and (3) increased education level. The IDA program, which ran from 1998 to 2003 in Tulsa, Oklahoma, provided low-income households with financial education and matching funds for qualified savings withdrawals, including a 1:1 match for educational uses. We find a significant impact on education enrollment and positive (but nonsignificant) impacts on degree completion and increase in level of education. We also examine the interaction between gender and treatment assignment, finding that the IDA had a strong positive effect on increased educational attainment for men but not for women.

Credit Building in IDA Programs

Objective: This article reports on the impact of the Individual Development Account (IDA) program on credit. Method: Using a convenience sample of IDA participants ( N = 165), data were analyzed using paired sample t tests, independent sample t test, one-way analysis of variance, Mann–Whitney U Tests, and Wilcoxon Signed Rank Tests. Results: Results indicate that participants improved their credit history and score, as compared with nonparticipants, and those who completed the program within a year experienced the most positive change in credit score. Conclusion: IDAs facilitate improvement in credit score and history.

Saving for Success: Financial Education and Savings Goal Achievement in Individual Development Accounts

Using microdata from the American Dream Demonstration, the current study examines factors associated with savings and savings goal achievement (indicated by a matched withdrawal) among participants of individual development account (IDA) programs. Multinomial logit results show that hours of participation in financial education programs, higher matched caps, prior use of a savings account, and greater educational attainment are each associated with a greater likelihood of savings and savings goal achievement. IDA programs need to maximize available resources, particularly financial education, to assist participants in achieving savings goals.

Weathering the storm: How have IDA homebuyers fared in the foreclosure crisis?

This study is the first to compare the homeownership outcomes of Individual Development Account (IDA) homebuyers with other low-income homebuyers. The IDA homebuyers purchased homes in 16 states with IDA funds between 1999 and 2007. We compare both loan terms and foreclosure outcomes for the IDA homebuyer sample to comparison groups of other low-income homebuyers who purchased homes in the same counties and during the same time period. We find that IDA homebuyers were more likely to receive government-insured loans and less likely to receive high interest rate or subprime loans than other low-income homebuyers. Further, we find that cumulative foreclosure rates for IDA homebuyers were one-half to one-third the rate for other low-income homebuyers in the same communities. Overall, the findings suggest that low-income IDA program participants have fared better in the foreclosure crisis than other low-income homebuyers.