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 Individual Development Accounts (IDAs) are matched savings accounts that enable low-income American families to save, build assets and enter the financial mainstream.
IDAs reward the monthly savings of the working poor who are building toward purchasing an asset such as a first home, paying for post-secondary education or starting a small business.
Accounts held in local financial institutions are matched by both private and public sources at a rate determined by the sponsoring organization, which can vary from 50 cents to five dollars for every dollar saved. Legislation exists that contains a federal and state tax credit for financial institutions that sponsor IDAs, allowing for those institutions to receive a set percentage of tax credit on every dollar they match. As an incentive for the match, participants are typically required to receive economic literacy training.
IDAs were first proposed by Washington University professor Michael Sherraden in a report published by the Progressive Policy Institute in 1990. Asset building strategies like IDAs are powerful opportunities that allow working families to invest in themselves, their children and their communities.
For more information on IDAs, contact your Rea associate.
- by Chad Welty, CPA (Medina Office)
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