Mark Schreiner, Michael Sherraden, Margaret Clancy, Lissa Johnson, Jami Curley, Min Zahn, Sondra Beverly, Michal Grinstein-Weiss

(2001) Changing Financial Markets and Community Development, pp. 183-216, edited by Jackson L. Blanton, Alicia Williams, and Sherrie L.W. Rhine, Federal Reserve Bank of Chicago

pp. 185–215 in Michael Sherraden (ed.), Inclusion in the American Dream: Assets, Poverty, and Public Policy,  New York: Oxford University Press, ISBN 0–19–516819–4.

To escape from poverty requires assets, be they human, physical, social, or financial. Individual Development Accounts (IDAs) are designed to help the poor to build assets. Withdrawals from IDAs are matched if used for home purchase, post-secondary education, or self-employment. Participants also receive financial education and support from IDA staff. This paper discusses evidence from the American Dream Demonstration (ADD) on a series of questions.

Can the poor save in IDAs? Low-resource people did save and build assets in IDAs in ADD:

--Average monthly net deposits per participant were $25.42.
--The average participant used two-thirds of match-eligibility.
--The average participant made a deposit in 7 of 12 months.
--With an average match rate of 2:1, participants accumulated about $900 per year in IDAs.

How do IDAs work? Key links between savings and institutional characteristics in ADD were:

--Savings increased—up to a point—with more hours of financial education.
--Higher match rates were linked with fewer unmatched withdrawals, less risk of exit, but not higher savings.
--Higher match caps were associated with better savings outcomes.
--Where do IDA deposits come from? Participants used both new savings and reshuffled assets.

Who saves in IDAs? ADD did not necessarily cream only the most-able:

--Income was not linked to savings, and the very poor saved a higher rate than the less-poor.
--The receipt of public assistance, all else constant, was not associated with savings.
--Asian Americans saved about $10 more per month than Hispanics or Caucasians and about $20 more per month than African Americans or Native Americans.

What do IDAs cost? So far in ADD, program costs were about $2.70 per dollar deposited. Costs seem to have fallen through time.

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