Individual Development Account Program Research Articles

Accounting for the role of habit in regular saving

The present study combines insights from social psychology and economics by examining the role of savings habits in regular saving. As frequently practiced, automatic, and goal-facilitated behaviors, savings habits play a critical role in everyday financial decisions. Using the Self-Report Habit Index developed by Verplanken and Orbell (2003), we collected and analyzed survey data to (1) validate the role of habit in regular saving; (2) test whether participation in a savings program, the Individual Development Account program, facilitates habit formation; and (3) examine the role of habit in individual’s perception of financial strain. The results showed that habit mattered for regular saving. It influenced savings amounts above and beyond Theory of Planned Behavior and deposit frequency measures. Habit strength increased over time during program participation and savings habits reduced the stress of financially difficult situations.

Does Individual Development Account Participation Help the Poor? A Review

Objectives: The purpose of this study is to review the current empirical research regarding the financial effects of participation in Individual Development Account (IDA) programs. Methods: Peer-reviewed outcome studies identified through electronic bibliographic databases and manual searches of article reference lists are reviewed. A total of 1 randomized controlled trial, 1 quasi-experimental study involving a comparison group, and 13 preexperimental 1-group pretest—posttest studies, were found. Results: Findings suggest IDA participants are capable of saving; however, total amount of savings is limited and may simply represent a reallocation of assets. Additionally, there is little evidence that the poor are enabled to achieve one of the three primary purposes of IDA programs (e.g., home ownership, postsecondary education, and microenterprise). Conclusion: It is premature to conclude that IDAs are an effective means of assisting low-income individuals in the development of assets. A stronger evidentiary foundation is needed, consisting of randomized controlled trials and cost-effectiveness and cost—benefit studies.

The Financial Credit Profile of Low-Income Families Seeking Assets

Individual Development Account (IDA) participants need strong credit histories to access affordable credit for their IDA asset purchase. Using a convenience sample of IDA participants (N = 188) recruited from the St. Louis, MO area, this study presents credit profile data addressing utilization of alternative and mainstream financial services, amount of debt carried, and elements needed to improve credit. This study presents data on the credit profile of IDA participants (N = 188). Compared to national IDA participants, participants in this study had higher incomes, were more educated, and had a higher rate of being “banked.” The sample was not overburdened with their monthly debt. However, participants also utilize higher-cost alternative financial services, such as payday lenders and pawnshops, at similar rates to other low-income families and are beginning their IDA programs with low credit scores and poor credit history. Participant needs for credit assistance is discussed, and practice, policy, and research implications are provided.

Poverty Among Adults with Disabilities: Barriers to Promoting Asset Accumulation in Individual Development Accounts

Adults with disabilities disproportionally experience poverty. We examine one novel strategy to promote economic well-being among adults with disabilities living in or near poverty, namely Individual Development Accounts (IDAs). IDAs are designed to help individuals save money and subsequently accumulate assets. Although adults with disabilities account for the majority of IDA participants, scant attention has been paid to their IDA saving performance. We describe the significance of accumulating assets, particularly as it relates to adults with disabilities. We then map the nature of IDA programs and analyze barriers to participation in IDAs and asset accumulation related to conflicting federal policies and a lack of sensitivity to disability-specific needs. We conclude by offering policy recommendations from our analysis, including the need to eliminate the means-tests used in welfare policies, de-linking participation in IDAs from employment status, and involving people with disabilities in designing and evaluating asset accumulation policies and programs.

Second-Generation Individual Development Account Research: Preliminary Findings

Historically, the poor have been excluded from asset-building policies, and consequently have accumulated very little wealth. The discrepancy between those with the highest incomes and those with the lowest continues to widen dramatically, with little hope of change unless asset-building polices are created to include the poor. Not only is this an issue of economic inequity, but of social and personal inequities as well. This paper describes the first year of a bi-state, longitudinal study that compares and contrasts specific measures of well-being between participants in Individual Development Account programs and low-income and low-wealth individuals who are not participating in an Individual Development Account program.

Exploring Saving Performance in an IDA Program: Findings for People with Disabilities

Asset development policies have been promoted as a means to create a more inclusive ownership society. During the past few years, asset-building scholarship has begun to focus specifically on marginalized groups, including people with disabilities. Using a sample of individual development account (IDA) program participants (N = 376), the authors examine effects of disability status on IDA saving performance. They also assess variations in saving performance by individual and programmatic characteristics. Results suggest that disability status, in addition to a number of individual and program characteristics, is associated with saving performance in an IDA program. Implications for practice and scholarship are presented. KEY WORDS: asset building; disability; IDAs; institutional characteristics; savings ********** The steady increase in levels of marginalization and unequal distribution of wealth in the United States over the past three decades has prompted interest in antipoverty policy that expands the wealth of individuals currently in poverty through asset-building strategies such as individual development accounts (IDAs) (GrinsteinWeiss, Wagner, & Edwards, 2005; Sherraden, 1991). IDAs are among asset accumulation programs that are increasingly being presented as a primary vehicle through which individuals and households with limited economic resources and opportunities can gain a foothold on the American economic ladder (Boyle & Boguslaw, 2007; Sherraden, 2001). (IDAs are a special savings accounts targeted at the working poor population [mainly those with incomes below 200% of the federal poverty guideline]. In these programs, poor people are encouraged to save. The deposits in IDAs are matched [the match rate ranges from 1:1 to 6:1].The matched savings can be used for investing in any of the following assets: microenterprise, homeownership, postsecondary education, or retirement [see, Schreiner et al., 2001, for a detailed description of each of these programs]). Unlike other asset-building programs, IDAs are unique in that specific savings goals--such a downpayment on a home, small business capitalization, advanced education, or retirement--are identified by program participants. Since the mid-1990s, a number of policies promoting IDAs for asset building among low-income individuals and households have been put in place. An example of these is the 1996 Welfare Reform Act, which included IDAs as a state option, allowing states to use funds from block grants for matched savings accounts for low-income individuals and households without counting the savings toward prevailing asset limits in means-tested programs (Edwards & Rist, 2001). Another example is the 1998 Assets for Independence Act, authorizing $125 million to be used in account matching and limited administrative funds for an IDA demonstration over a five-year period (Kameri, 2000). Current estimates are that over 500 IDA programs have been developed in the United States since 1991 (Edwards & Rist, 2001; Schreiner et al., 2001), with upwards of 50,000 IDA accounts in operation (Corporation for Enterprise Development, 2007). Previous research within the context of the American Dream Demonstration (ADD), the first national policy IDA demonstration project, has begun to demonstrate that poor people can save, albeit in small amounts, and accumulate assets (Schreiner & Sherraden, 2006). Although IDA program participants in ADD included a significant number of people with disabilities, disability itself has not yet been examined as a factor that potentially may influence saving outcomes. To our knowledge, there is no existing empirical evidence from research on IDA participants that has examined outcomes for people with disabilities. The lack of specific research on disability status and IDA performance makes it difficult to ascertain whether the outcomes of IDA participation are any different for people with disabilities or if the effects of institutional and individual characteristics on saving performance vary by disability status. …

More Than a Penny Saved: Long‐Term Changes in Behavior Among Savings Program Participants

This article examines the levels of savings of former participants in a matched savings program. Findings from a survey of Individual Development Account (IDA) participants and a general low‐income population sample show that participants who successfully completed the savings program report higher household savings than both participants who left the program early and a non‐participant comparison group, suggesting that successful completion of an IDA program may improve the financial dispositions and behaviors associated with long‐term savings. Three predictors of saving behavior emerged: access to the financial mainstream, individual psychological disposition, and the presence of children in the household.

Second Thoughts: Who Almost Participates in an IDA Program?

ABSTRACT Using data reported on applications to a large individual development account (IDA) program (N = 758), the purpose of this study is to examine the self-selection process. Persons who applied to the program but did not enroll had second thoughts about the IDA. Multivariate logistic regression showed that children in the household and negative net worth along with vehicle nonownership were positively related to second thoughts. Education-savers were more likely than home-savers and business-savers to have second thoughts. This information can be used to target individuals at risk of not enrolling in IDAs, ultimately expanding access to underserved, low-income households. Future research is needed to understand how IDA recruitment strategies and institutional characteristics affect program participation and second thoughts.

Promoting self-determination and financial security through innovative asset building approaches.

Studies indicate that asset development programs such as Individual Development Accounts (IDAs) can enhance the economic security of low-income populations; however, only a handful of asset development programs have been implemented specifically to serve people with psychiatric disabilities, and larger programs have not collected disability-specific information. The purpose of this article is to increase our knowledge about the use of IDAs to enhance self-determination and recovery for people with psychiatric disabilities. Background information about IDAs is presented followed by case studies of two IDA programs that serve people with psychiatric disabilities. The use of IDA programs in enhancing self-determination among people with psychiatric disabilities is discussed, along with barriers and future directions.

Decision Risks and Individual Development Accounts: An Alternative View

This article analyzes the impact of risk on decisions made by the poor within the context of the Individual Development Account (IDA) program. IDA is a matched savings program designed to help low-income households invest in appreciating assets. For these households, the risk involved with participation in IDA relates to the sacrifice they make by reducing current consumption - sometimes in a significant way - in order to be able to save. The program does not offer a match on savings per se; rather, it offers the match only when savings are invested in certain assets. Since there is no guarantee that IDA savings will be converted into assets qualified for the IDA match at the time of enrollment, participation in the program is characterized as an inherently risky decision, which is governed by different sets of behavioral factors, including the risk-taking preferences of low-income households. Consideration of risk provides an alternative explanation for issues related to program take-up, inactivity, and attrition rates. It also offers new and simple ideas on how to improve results. In addressing these problems, the article recommends using an IDA model that includes a flexible match component, to insure against the risk of unmatched savings and complement the existing IDA match structure. Simple modifications to current policy will maintain the total cost of IDA match at the existing levels. Introduction of a flexible match may mitigate the risk of decision to participate in IDA for the most vulnerable group of participants. It can also potentially reduce the percentage of inactive accounts while improving the overall retention rates in the program. Moreover, the recommended changes would not alter the nature of the IDA program, as the flexible match would only amount to a fraction of the total asset investment match.

Unemployment, Financial Hardship, and Savings in Individual Development Accounts

Using longitudinal data collected at the Tulsa Individual Development Accounts (IDAs) program, this study aims to examine to what degree unemployment and accompanying financial hardship are associated with savings in Individual Development Accounts. Of 328 participants in the IDA program, 89 (27%) participants experienced unemployment during the 4-year demonstration period. Participants who experienced unemployment during the demonstration period were more likely to perceive financial hardship. Furthermore, unemployed participants with financial hardship were found to save less, as measured by average monthly net deposit (AMND), than participants who were employed throughout the demonstration. Policy and practice implications are discussed.

Arkansas IDA Programs: Examining Asset Retention and Perceptions of Well-Being

ABSTRACTAs the antipoverty initiative known as Individual Development Accounts (IDAs) enters into its second decade of implementation, research needs to examine social policy and program outcomes for both IDA participants and their communities. This pilot study examined the asset retention rate of 85 graduates from three Arkansas IDA programs; the relationship between household assets and economic strain, self-efficacy, and future orientation; and whether the duration of asset ownership had an effect on well-being. Findings indicate that the majority of IDA program graduates were likely to maintain that asset at follow-up (range = 6–36 months). Differences were found based on the asset purchased, with homeowners more likely and small business owners less likely to report higher rates of well-being at follow-up. Implications of these findings include the need to provide support for practitioners to obtain funding for IDA programs and to include information and resources for those starting their own business to help safeguard against potential stressors.

Effects of Participating in an Asset-Building Intervention on Social Inclusion

ABSTRACT The United States is arguably one of the richest countries in the world. However, poverty is still an issue of great concern. This observation suggests the need for more innovative interventions to reduce severe need and create terms for meaningful participation of vulnerable individuals in economic, political, and social exchange. Using a sample of Individual Development Account (IDA) program participants (N = 840) randomly assigned to a control and experimental group, we explore the relationship between participating in an IDA program and social inclusion. Findings reveal a significant relationship between the two variables. Although modest, these results provide a useful framework for examining factors that may affect an individual's capacity to move from vulnerability into enhanced economic, political, and social participation. They also point to a role for asset-building programs in an effort to empower vulnerable individuals.

Do institutions really matter for saving among low-income households? A comparative approach

This study aims to examine the extent to which competing theories explain saving of low-income households in Individual Development Accounts (IDAs). Competing theories include the individual-oriented perspective, a social stratification perspective, and institutional saving theory. We use American Dream Demonstration (ADD) data collected at the Tulsa IDA program. Compared with the individual perspective and the social stratification perspective, institutional features explain a large part of the variance in saving outcomes measured by average monthly net deposit (AMND) and deposit frequency. Findings suggest that institutional structures encouraging low-income households to save may contribute to more inclusive asset-based policy.

Perceived Effects of Participation in an Asset-Building Program on Construction of Future Possibilities

Acknowledging the inadequacy of traditional welfare policies in moving households from poverty to economic self-sufficiency, we examine the psychological effects of participating in an asset-building intervention. We use a sample of 840 respondents who were enrolled in a community action program and assess whether or not participating in an Individual Development Account (IDA) program predicts a respondent's construction of future possibilities. Results show support for the hypothesized relationships. Certain respondent characteristics—e.g., age and income—are significantly associated with the dependent variable. These findings may have important implications for social policy. Participating in an IDA program may empower program participants to think and act on future possibilities, influencing their outcomes as well as the overall socioeconomic development of their communities.

The Net Worth of Female‐Headed Households: A Comparison to Other Types of Households

Abstract: This article presents the results of a study that investigated the level of assets and debts that female‐headed households have in comparison to those of married‐couple households and other types of households. The empirical results revealed that the amounts of net worth of married‐couple households and male‐headed households were significantly larger than that of female‐headed households. We discuss policy implications stemming from the findings of the study and recommend that the United States seriously consider creative policy approaches aimed at empowering low‐income households such as employment‐related supportive policies, microenterprise programs, and Individual Development Accounts programs.

Cost-Effectiveness in Individual Development Accounts

Because resources are limited, the benefits and costs of social-work interventions—like all interventions—must be compared with the benefits and costs of alternatives. Evidence-based practice should ask, What works? How well does it work? And what does it cost? This article analyzes the provision of Individual Development Accounts (IDAs) with a new cost-effectiveness framework meant to help make assumptions and judgments explicit. In the specific IDA program examined, 1 month of services for 1 participant costs about $64. The mere existence of a cost figure— regardless of whether it is seen as high or low—has sparked many questions in the IDA community: How can costs be reduced without sacrificing quality? Which features of IDAs are essential? Are IDAs worth it? This sort of healthy questioning is precisely the purpose of cost-effectiveness analysis in social-work practice.

Individual Development Accounts: Participants’ Characteristics and Success

:Asset-building strategies have been touted as a new approach to helping low-income families achieve economic independence. By providing incentives to save and invest in an asset—such as a home, a business, or additional education—Individual Development Accounts (IDAs) hope to help lower-income families advance economically. Using the data collected on 21 IDA programs in North Carolina, this article addresses the characteristics of the persons served by these programs as well as the factors related to participant success and failure. The results indicate that IDA participants are different in many respects from the general population of low-income persons. They are more likely to be single African-American mothers with relatively high levels of education and full-time employment. Effective case management and economic literacy training contributed to program success, whereas job loss and financial emergencies contributed to the dropout rate. The implications of these findings for expanding IDAs to a wider population are considered.

Investing in Individuals for Independence

Individual Development Accounts (IDAs) are tax-protected, matched savings accounts designed to help those with low incomes and few assets buy a home, capitalize a business, or fund higher education. Originally authorized through the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), IDAs are designed, implemented, and evaluated through public-private partnerships. In January 2003 over 500 IDA programs had been created, with more than 10,000 low-income individuals making contributions. This paper outlines the rationale for IDA as an asset building strategy for the poor, describes the design and operation of IDAs, and provides results of early program evaluations. It concludes by arguing that IDAs are a smart practice that can and should be expanded.

Short Term and Long-Term Savings in Low Income Households: Evidence from Individual Development Accounts

Previous research has found that individuals frame savings for short-term and long-term uses. These findings are reinforced through in-depth interviews with 59 participants and 25 controls in an experiment testing the effects of Individual Development Accounts (IDAs). All respondents are from low-income households. IDA participants appear more likely than control respondents to earmark savings for long-term purposes and asset investments. This could be interpreted as a result of the institutional saving structure provided through the IDA program. IDA participants are presented with savings goals, which they believe are made attainable through conveyed expectations, matching funds, financial information, and staff facilitation. Interviews suggest that savings may lead to psychological, behavioral, and economic effects. Future research can explore the distinct and marginal effect that each institutional dimension has on savings over the long term and the effects of savings on family well being.