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IDA Grants

By Jillian Wheeler | June 10, 2005

During the mid-1990’s, visionary staffers working in several foundations had a radical idea. What would happen if low-income Americans were given an opportunity to build wealth – the same kind of opportunity higher-income people take for granted? Would they have the courage and perseverance to save to start businesses, buy houses, or go to college? What if their contributions to savings were enhanced with grant money? How could that change their lives and the lives of their families?

The foundations believed this kind of grants program could have a huge positive impact, and their vision was a long-term one, involving private institutions as well as government. First, however, they had to find out if such a program would be successful. They established the American Dream Demonstration project.

ADD operated at fourteen sites for a period of four years. During that time, 23% of ADD “graduates” started or grew their own businesses. 28% bought a home. And 21% pursued higher education. Recipients of the grants became more active in their communities, and were more hopeful and enthusiastic about their futures. Without a doubt, such programs were working.

In 1998, Congress passed the Assets for Independence Act (AFIA). The funding authorized by this legislation created opportunities for another 30,000 to 40,000 Americans to open Individual Development Accounts and receive IDA grants. Since then, the program has grown exponentially.

Twenty-nine states and the District of Columbia have now passed laws to support IDAs. Thirty-two states have made IDAs part of their welfare reform initiatives. Seven states had started IDA programs through administrative action. IDA advocates throughout the country are continuing to spread the word, in the effort to expand funding. Today, there are hundreds of community action agencies, banks, nonprofit organizations, credit unions and local government agencies that offer IDA programs.

The purpose of IDAs is to help people save money, so they can invest in themselves and move to a higher income level. Participants in IDA program must be income eligible, and the guidelines vary from one program to another. Participants open savings accounts and make regular contributions, and these contributions are matched by grant funds. Sometimes the match is dollar to dollar; sometimes it is two or even three dollars for each dollar saved.

The accounts must be used only for buying a home, higher education, investing in a new or existing business, or for retirement. Participants are also usually required to take part in money management classes.

Statistics show that currently one-third of all Americans, and two-thirds of African-Americans, own few or no personal assets. As many as one-fifth have no bank accounts.

The Corporation for Enterprise Development (CFED) has estimated that for every dollar invested in IDAs, the national economy would receive the equivalent of five dollars through higher earnings, new businesses, new houses, lower welfare costs, and the potential generated by higher education.

If you or someone you know would like more information about IDAs, check out the IDA Network site, which also includes links to programs in your area:

http://www.idanetwork.org/

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