Individual Development Accounts Research Articles

MISSING THE MARK: THE IMPORTANCE OF FINANCIAL ANXIETY IN FINANCIAL SKILLS TRAINING FOR FOSTER YOUTH

It is well established that many former Canadian foster youth struggle with financial issues after aging out of care. Much of the financially focused intervention literature speaks to financial literacy training within independent living programming (ILP) or financial empowerment within individual development accounts (IDAs). These important programs offer educational modules to address financial skills or increase youth access to savings. Yet they are not sufficient, as neither addresses the emotional side of personal financial decision-making. Growing up in poverty can create emotional challenges related to money, such as financial anxiety. Financial anxiety affects quality of life in complex ways. Using three clinical composite profiles of youth aging out of the youth protection system in Quebec, this paper highlights some of the complex challenges faced by foster care alumni in dealing with economic insecurities. It is our proposition that we must be more mindful of current and former foster youth’s financial well-being and adapt financial literacy training accordingly. Further, these programs must be assessed for short- and long-term efficacy. Neglecting to measure and address financial anxiety for foster youth and alumni of care risks setting them up for preventable hardships and failures. This paper thus proposes that Canadian child welfare organizations and research teams must further develop this area of inquiry and intervention.

Financial Outcomes of Interventions Designed to Improve Financial Capability through Individual Development Accounts: A Systematic Review

ABSTRACT Purpose Driven by a desire to improve the financial well-being of lower-income households, financial capability interventions are gaining attention in practice and public policy. IDAs are a financial capability intervention designed to build family assets through incentivized savings. Method This systematic review focuses on financial capability interventions that provide Individual Development Accounts (IDAs), a restricted-used savings account paired with financial education. Eligible studies included financial education and a matched saving account to be used for a financial asset purchase. Results Three large research projects with multiple studies and one additional unique study published through May 2020 were eligible for study inclusion. Results suggest that, thus far, there is mixed evidence on IDAs effects on financial behaviors or financial outcomes. Conclusion Our review suggests the need for additional studies that use rigorous research designs that investigate the IDAs effects on financial behaviors and outcomes.

Community-Based Asset Security: A Scoping Review.

To explore how and what programs or projects address asset security at the community level as a social determinant of health. To conduct a scoping review following Preferred Reporting Items for Systemic Reviews and Meta-analyses guidelines, the databases searched included CINAHL, EconLit, Embase, Pubmed/Medline, and the Sociological Collection of EBSCOhost. Keywords used for article identification were ("asset" AND "community") OR ("asset security" AND "community"). Studies were included if published between 1990 and 2019, written in English, and published in a peer-review journal. Reference lists of selected articles were also reviewed for additional articles. Two authors reviewed titles and abstracts separately, then reviewed full-texts for sample selection. After identifying 2,585 articles, researchers refined the final sample to 28 articles. Programs or projects within the sample focused on direct financial interventions or indirect interventions. Direct interventions included financial programs, such as Individual Development Accounts, or ownership opportunities, such as cooperatives or microenterprises. Indirect interventions included those focused on the built environment, such as asset mapping to identify a community's resources, or focused on education, such as those for social workers. Financial programs, ownership opportunities, assessments of the built environment, and targeted education complement one another to influence a community's assets from many angles. Income inequality has evolved from repeated institutionalized practices that inadvertently reinforce that inequality. Published literature emphasizes the local nature of needs and challenges, culturally responsive efforts, and that observing an impact often requires longitudinal efforts.

The Relationship Among Demographic Factors, Transition Services, and Individual Development Account (IDA) Saving Participation Among Transition-Age Youth With Disabilities

Saving participation in adolescence is crucial for young adults to achieve financial well-being over their lifetime. Yet, very little is known about the factors that encourage saving participation among youth with disability, including youth who receive supplemental security income (SSI). This study examines relationships between personal and family factors, transition services, and participation in Wisconsin Promoting Readiness of Minors in Supplemental Security Income (PROMISE) individual development account (IDA), within a sample of youth with disabilities who receive SSI. Results of the hierarchical binary logistic and hierarchical multiple regression analyses suggests that the PROMISE interventions variable sets emerged as the most frequent predictors of IDA saving participation among youth receiving SSI. Specifically, work incentive benefits consultation services, financial capability-focused financial coaching services, and self-advocacy training were significant predictors of a youth’s IDA saving participation. This study’s findings offer important implications for transition planning and building financial capability.

Exploring the factors predicting savings among Korean working poor young adults

본 연구의 목적은 저축이 빈곤 청년들의 탈빈곤을 지원하고 빈곤에의 재진입을 예방하며 나아가경제적 안정을 성취하는 데에 기여하는 중요한 요소로 보고, 생계급여 수급 가구 청년들의 저축에영향을 미치는 요인을 탐색하는 것이다. 빈곤 청년의 인구사회학적 특성 및 건강 요인, 경제적특성, 고용 특성, 제도적 특성이 저축액에 미치는 영향을 위계적 다중회귀분석을 사용하여 검증하였다. 또한 자산형성지원사업에 참여하고 있는 경우, 자유납입액과 이를 제외한 저축액에 영향을미치는 요인이 다를 수 있기 때문에 자유납입액을 포함한 총 저축액과 제외한 저축액을 구분하여분석하였다. 분석결과, 인구사회학적 특성 및 건강 요인만을 투입한 모델에 비해 경제적 특성, 고용 특성, 제도적 특성을 추가적으로 투입하였을 때, 모델의 설명력이 유의한 정도로 높아지는것으로 나타났다. 변수별 영향력에 대한 분석결과, 근로/사업소득, 지출이 많을수록, 시간제에 비해전일제 근로자일수록, 임시·일용직에 비해 상용직 근로자일수록, 자산형성지원사업에 참여할수록 총 저축액이 더 많은 것으로 나타났다. 자산형성사업 자유납입액을 제외한 저축액의 경우, 남성보다 여성이, 지출이 많을수록, 시간제에 비해 전일제 근로자일수록, 임시·일용직에 비해 상용직근로자일수록 자유납입액을 제외한 저축액이 많은 것으로 나타났다. 이러한 결과로부터 사회복지실천적, 정책적 함의를 도출하고자 한다.As savings can help people escape from poverty, prevent re-entry to poverty, and achieve financial stability, this study aims to comprehensively explore the factors predicting savings among low-income young adults in South Korea. We examine the effects of socio-demographic characteristics and health status, economic, employment-related and institutional factors on savings among young adults with ages between 19 and 34 years old using hierarchical multiple regression. The study utilizes two different dependent variables - Savings with and without savings to individual development account(IDA) because the factors affecting the amount of savings can be different according to whether participating in IDA or not. The study results suggest that those with higher income, and more spending, who work as full-time employee and are regular workers (permanent employees) and participate in asset-building policies (e.g., individual development accounts for young adults) are more likely to save compared to their counterparts with lower income, and lower spending, who work as part-time employees, are temporary workers, and do not participate in asset-building policies. Based on our findings, practice and policy implications are also discussed.

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.

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.

Match Rates, Individual Development Accounts, and Saving by the Poor

Individual Development Accounts (IDAs) provide poor people with matches for savings used for home purchase, post-secondary education, or microenterprise. Match rates for IDAs in the American Dream Demonstration (ADD) were typically 1:1 or 2:1 but ranged as high as 7:1. How did the match rate affect IDA savings? The analysis here controls for a number of confounding factors often ignored in similar studies of 401(k) plans. In ADD, higher match rates were generally associated on the extensive margin with a greater likelihood of saving something in IDAs and—on the intensive margin for those who saved something—a lower level of IDA savings.

Fostering Low-Income Homeownership: A Longitudinal Randomized Experiment on Individual Development Accounts

For low-income families, homeownership represents an important strategy for promoting long-term social and economic development. Individual Development Account (IDA) programs facilitate saving toward assets such as a home through matching, financial education, and case management. Using longitudinal experimental data from the American Dream Demonstration, this study examines the impact of IDA participation on homeownership rates and on clearing old debts. Low-income participants were interviewed after 18 months (Wave 2) and after program completion at 48 months (Wave 3). Logistic regression results indicate that among those who were renters at baseline, IDA participation significantly increases the clearing of old debts at Wave 2 and homeownership rates at Wave 3. IDA participants with cleared debt activity had the highest probability of becoming homeowners at Wave 3 (32 percent), while those who were not IDA participants and did not have such activity had only a 9.6 percent probability.

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.

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.

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.

Saving from poverty: A critical review of Individual Development Accounts

The much-heralded anti-poverty strategy of asset-building has been adopted by many countries across the world. Asset-building programmes are designed to help low-income families achieve long-term financial stability through savings and asset accumulation. This article offers a comprehensive and critical review of the current state of theory and research on asset-building programmes, with an emphasis on Individual Development Accounts (IDAs) in the United States. Studies of IDAs have involved quantitative evaluations of the programme, focusing on three key topics: the programme’s effects on clients’ savings behaviour, its effects on clients’ outlook on life, and its long-term impact. On the basis of a careful review of these findings, it is argued that the claim that IDA programmes and asset-building in general have the potential to reduce poverty is overrated and premature. The article builds on theoretical insights regarding the nature of neoliberalism to make sense of the picture portrayed in the research literature.

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.

Citizen Potawatomi Community Development Corporation: Financial Inclusion in Indian Country

The case features the Citizen Potawatomi Community Development Corporation (CPCDC), based in Shawnee, Oklahoma. The CPCDC provides microloans, business loans, short-term consumer loans, and other financial services to underserved Native American communities. On one hand, the CPCDC is driven by a mission to deliver responsible, affordable lending and help disadvantaged Native populations join the economic mainstream. On the other hand, the organization strives to offer only financially self-sustainable products and services. In 2010, Cindy Logsdon (the CPCDC's assistant director) helped to implement the JumpStart Auto Loan program, which was to be offered to employees of tribal enterprises. Logsdon must decide whether to continue offering the JumpStart Auto Loan, which fills a market need but is one of the highest-risk products on the CPCDC's books. Excerpt UVA-ENT-0202 Jun. 16, 2014 CITIZEN POTAWATOMI COMMUNITY DEVELOPMENT CORPORATION: FINANCIAL INCLUSION IN INDIAN COUNTRY Cindy Logsdon, assistant director at Citizen Potawatomi Community Development Corporation (CPCDC), based in Shawnee, Oklahoma, faced a dilemma. In 2010, she had helped to implement the JumpStart Auto Loan program her organization offered to employees of the Citizen Potawatomi Nation tribal enterprises. On one hand, the loan filled a need in the market the CPCDC served. As did most of the United States outside of high-density metropolitan areas, Oklahoma lacked an efficient mass transit system, and, in order to get to work, employees needed reliable cars. On the other hand, the auto loan was one of the highest-risk programs the CPCDC offered. In addition, the loan portfolio was small, and so was the income it generated. The CPCDC was a certified Native American Community Development Financial Institution (CDFI) and loan fund established in Shawnee in 2003 (Exhibit 1). It provided microloans, business loans, short-term consumer loans, credit builder loans, individual development accounts (IDAs), and small business–development services to underserved Native communities. The CPCDC served Citizen Potawatomi Nation members and employees nationwide, as well as Native American–owned businesses throughout Oklahoma. One overcast day in January 2014, Logsdon sat in her office in Shawnee, reviewing the JumpStart Auto Loan program's financial data (Exhibit 2). Over the past four years, the loan portfolio had grown by only 10 to 13 loans a year, and the average loan size was about $ 10,000. Logsdon had to ask herself whether helping 10 to 13 employees annually was worth the trouble. She recognized that, in addition to the cost of funds—which at 3.5 percentage points translated to $ 7,000 per year and about $ 3,500 per year in miscellaneous expenses—there was also the cost of paying an employee to manage the program. She wondered if the social benefit of providing affordable car loans to a relatively small group of people and the revenue generated by the portfolio were enough to offset the cost of offering the loans. . . .

Connecting Saving and Food Security: Evidence from an Asset‐Building Program for Families in Poverty

This study examines food insecurity among children of participants in a federally funded savings program in the United States, the Individual Development Account (IDA) program. We measure child food insecurity of savings program families by using the eight questions of the Current Population Survey's Food Security Supplement. About 39.4% of savings program families report food insecurity. No differences in children's food hardship between current and past program participants were identified. Examining predictors, propensity to plan for money tend to be associated with higher odds of children's food insecurity. By contrast, frugal behavior, lower material deprivation, and higher subjective well‐being tend to reduce the odds of children's food insecurity. Findings also confirm previous literature on the association of alternative financial services and higher food insecurity among children.

The Impacts of Individual Development Accounts, Assets, and Debt on Future Orientation and Psychological Depression

ABSTRACTIndividual development accounts (IDAs) have been adopted in communities across the country as a way of helping lower-income individuals accrue financial assets. These programs match the savings of program participants if they invest them in the purchase of a home, the creation or expansion of a business, or additional education. Beyond the financial benefits of holding assets, scholars have argued that they should also result in psychological benefits such as enhanced future orientations and decreased depression. This study tests this argument with data from a randomized controlled experiment involving 1,103 applicants to an IDA program. The findings show that assignment to the IDA program was not associated with either future orientation or depression 10 years later. The value of assets held at that time, however, was found to be negatively associated with depression. In addition, self-reported financial stress was found to be negatively associated with future orientation and positively associate...

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.