Individual Development Accounts: The Best Poverty Assistance Program that We Never Hear About.

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I like to think I’m fairly immune to soft-hearted stories about people who are struggling to make ends meet or some other type of financial hardship that pushes them into the downward spiral of never ending debt. It’s a tough world, and it often pays to have a thick skin.

Most of the time, these stories are about some college kid who stupidly opened three different credit card accounts only to find out he is $10,000 in debt three days after graduation or someone who continually lived beyond her means only to awaken at the last moment shouting “how did I get here?”.

Such examples have made me fairly calloused, and I’m generally OK with giving them a Bah-Humbug. After all, they screwed themselves.

But tonight, I caught a glimpse into CBS’s series entitled “The Other America” and for some reason, this particular family’s struggle to make ends meet stood out from the others. Maybe I’m turning into a big softie, but the idea of a single mom raising three kids on a super tight budget got to me.

Watch CBS Videos Online

Compelling stuff isn’t it? Now who’s the big softie!

I rarely watch a major network like CBS because I’m generally watching CNBC, so when I caught this on the 6 o’clock news, it caught me completely off guard. Most of the news I watch revolves around the business world, and let’s face it, CNBC is a hardcore business channel that some critics have argued to lost touch with Main Street.

What are Individual Development Accounts?

I’ve never heard of anything like this until I saw this video clip tonight, but apparently these are government and/or privately funded programs that mimic a basic 401k plan where the employer matches a percentage of the deposited funds.

Essentially, an IDA member can receive up to a 2 to 1 match for every dollar they save at the end of the month. In other words, that translates to $200 in assistance matching funds they would receive for every $100 they saved and put into a bank account at the end of the month. Having $300 certainly sounds better than $100 right?

Ironically, my grandparents did something similar for me when I was a kid. I got an allowance from my parents, but the grandparents gave me matching funds as an extra incentive not to blow my “good grades” money on the first Transformer or Nintendo game that caught my fancy. It obviously worked very well because I’m definitely a penny pincher now.

Why does the Individual Development Account Program Exist?

From my reading, I found the IDA program’s primary function is to help individuals or families gain a solid foothold in a country that is getting increasingly more expensive to live. Last I checked, food costs money. A place to live costs money. Transportation costs money.

These are all difficult tasks to combat for those making a living at or near the poverty level, which is computed annually by the U.S. Dept of Health & Human Services found at this link.

The purpose of the program is to help low income families save enough cash to buy their first home so they are not throwing away money on rent, start their own business so they can generate additional sources of income while they are currently working, or even get a college degree to get a higher paying job once completed.

In addition, IDA members learn skills like budgeting or money management during mandatory classes that meet several times per month while enrolled in the program. Nothing is free in this world, but attending a few classes for a 2 to 1 match on their savings is a small price to pay in my opinion.

How to Qualify for the Individual Development Account Program?

The IDA’s qualification requirements aren’t what I would call static. Since government and private funding is available, there are different prerequisites for each particular group, and there are hundreds of different groups located around the country.

In general, these are the basic requirements:

Income Level – Most IDA program eligibility requirements are based upon the applicant’s proximity to the poverty threshold. Maximum income level is 200% above the specific poverty levels found here.
Earned Income – All or some percentage incoming funds must result in savings that comes from earned income. This is often from a wage paging job, but can occasionally be from social security or unemployment benefits.
Net Worth – How much you’re actually worth can directly impact your eligibility. Generally, a person who has little to no assets would be preferred candidates because they would require the most assistance to build enough savings to buy a first home or start a business.
Credit History – Surprisingly, this program does not look highly upon those with substantial amounts of credit card debt. Credit counseling is available, and can add to the chances of approval.

To search for availability within your state, check for more information at the Corporation for Enterprise Development (CFED) website.

Thoughts and Feedback

To me, this is a program that is designed to reward to those individuals willing to work, and weeds out all the others looking for a handout. Sure, it’s somewhat costly on the macro side of the economics equation (private funding helps to curb federal aid), but I think it’s gives those who are worthwhile a better possibility for success.

Of course, I may be wrong since I just heard about the program itself, but anything that helps out families like the Durham’s in the CBS video above is a win-win idea that I can support 100%.

Perhaps, I will even consider making donations to in the future.

As always, I would be interested in hearing additional viewpoints, success stories, and even a few horror stories about the IDA program if you have them. Whether you’re a proponent, or against the concept entirely, I would like to hear from you.