The IDA program was created and funded by the Washington State Legislature and signed into law in May of 2005. IDAs encourage working low-income individuals and families to save, invest and make purchases to improve their lives and move into the financial mainstream.
The IDA program is a restricted savings account in which savings are matched by private or public funds. IDAs provide rewards for monthly savings of working-poor families who are saving a portion of their income for an asset by providing matched dollars and training. While they are saving, participants receive credit and debt counseling, financial education, and asset specific training. Once participants reach their savings goal, which is 4 years of enrollment in the program, the match portion of the purchase is sent directly to the vendor, and the participant never has direct access to those funds.
The state provides matches for savings at a rate of one dollar for every dollar up to $4,000, but the average match is $2,000. Two-thirds of IDA contractors use federal dollars to stretch the state’s investment. For instance, the state provides a 1:1 match which means that an individual has to save $1 and CTED will match it with an additional $1. By using the federal match, the individual account holders can make it a 2:1 match.
Accountholders can use their state IDA funds for a variety of asset purchases, including:
- Purchase their first home
- Obtain post-secondary education
- Capitalize a small business
- Purchase a computer for work or education
- Make home improvements or repairs
- Purchase assistive technology to meet work-related needs.
- Buy an auto for work or education
RCW 43.79A.040 and 43.31 also established a special IDA pilot for foster teens transitioning from state care. This pilot is intended to help these vulnerable young adults save for and meet their housing, higher education, healthcare and transportation needs. While it is too early to report outcomes for the foster teen pilot, service providers are seeing positive impacts on youth stability and financial well-being.
Currently IDAs are offered in 11 of the state’s 39 counties. Contractors include Spokane Neighborhood Action Programs, Chelan-Douglas Community Action Agency, North Columbia Community Action, Lower Columbia Community Action, Share in Clark County, Tacoma Housing Authority, Associated Ministries, and United Way of King County.
For rules and FAQ's about individual development accounts please click here.
Progress Report and Update for 2007-2009 IDA Accounts
Since September 2007, an additional 233 enrollments were completed, bringing the total number of accounts in Washington State to 512. For each dollar of state match invested, many contractors leveraged an additional dollar in federal match. Since the 2006 start-up, $1.7 million in contracted state IDA funds have generated $1.8 million in federal and private funds that contribute to local projects. Individual account holders will add at least $1.2 million of their own savings over time for their collective purchases.
IDA Impact to Date
As of September 2008, 66 participants reached their savings goal and purchased an asset. Homeownership remains the number one asset goal for IDA participants at more than 50 percent or 33 homes. This is followed by vehicle purchases at 16 percent or 10 cars, 14 percent or 9 for small businesses, and 11 percent or 7 for post secondary education. The remaining 11 percent includes home improvement, rental assistance and computers accounts. It typically takes three to four years for low-income participants to meet their savings goals. Given the first state IDA accounts were enrolled in 2006, CTED expects a steep increase in asset purchases by early 2010.
Of the 66 purchases to date, six were made through the foster youth pilot helping youth successfully transition from foster care to adulthood.
No IDA Purchased Homes in Foreclosure
One of the reasons for the IDA program’s success is that it gives low-income account holders the opportunity to strengthen financial skills, save over a period of time, purchase and keep their asset. Because the focus is on changing long-term savings habits, training and credit repair, and policies that prevent account holders from obtaining predatory loans, participants take up to four years to save and purchase their asset. A recent evaluation conducted by United Way of King County shows that none of their IDA participants who purchased a home were foreclosed, partly due to the good case management and sound policies that protected homeowners in the IDA program.
IDA program outcomes are guaranteed as state match funds are only spent at the time of asset purchase. CTED performance-based payments are issued to contractors based on accountholder savings.
How can I learn more?
Contact Anee Brar at aneeb@cted.wa.gov or 360.725.4150 visit the website.
