Eligibility
An Individual Development Account (IDA) is a savings account for low-income workers that can be used to fund a small-business development, get a higher education, or buy a first home.
There are more than 250 IDA programs nationwide. Each one is unique and has slightly different eligibility requirements and operating procedures. One of the biggest benefits of setting up an IDA account is the matching funding that is offered under the program; IDA programs match your total savings when you reach your agreed-upon savings goal. In general, for every dollar you deposit into your account, your IDA program will match your deposit with somewhere between $1 and $4, depending on the program.
For example, if you have an IDA with a 3:1 match and you deposit $25, your IDA program would contribute an additional $75 towards your goal. You would have a total of $100! This makes the program a very effective way to save for a specific goal.
Program Eligibility
Each IDA program is different and eligibility requirements vary from program to program. Generally, most have the following requirements:
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Your annual income must be 200% of the Federal Poverty Guidelines ($30,120 for a single person, $40,880 for a couple) or less.
- Exception: In some cases, you may qualify if your income is 65% – 85% of the median income in your area.
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You must have earned income from a job.
- Exception: Some IDAs that are not funded by the federal government may have slightly different earned income requirements and allow you to have income from other sources.
- You must attend free financial literacy training. These classes usually cover topics such as money management, debt reduction, developing a savings plan, credit, and investing.
Some programs also have additional restrictions:
- Asset limits
- Based on your credit history
- Based on whether or not you are a U.S. citizen or qualified alien
Joanna is single and makes $30,000 per year. She doesn’t qualify for most IDA programs, because she makes more than 200% of the Federal Poverty Guidelines ($30,120). However, Joanna found an IDA program that accepts people who make up to 85% of the median income in the area. Since the median income for a single-person household in her area is $40,000 per year, Joanna qualifies for this program because she makes less than $34,000 (85% of $40,000).
IDA Savings Limit
Most IDA programs only allow you to have a certain amount of money be matched by your IDA account. For example, your program may only match $1,000 you save. The exact amount you can get matched will depend on the program you are using. You can deposit more money into your savings account, but only the goal amount will be matched.
Rosa is enrolled in an IDA program with a 3:1 match and a $1,000 savings cap. She deposits a total of $1,000 into the account and gets an additional $3,000 in matching funds. At that point, she has reached the savings limit and doesn’t have to deposit any more money into the account. She’s reached her goal amount and can spend her money on her goal purchase.
How to Apply for an IDA
If you are interested in starting an IDA, find an IDA program in your area. You can find good IDA program directories at the Family Assets for Independence in Minnesota (FAIM) program, the Prosperity Now, and the Assets for Independence Resource Center.
Some programs may have waiting lists. Even so, you may be able to begin the process by taking financial literacy training while waiting for a space to open up.
Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
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