Individual Development Accounts (IDAs)
An Individual Development Account (IDA) is a certain kind of matched savings account that you may open once you are a part of a program designed to improve your in financial literacy. You choose an approved goal to save for and use the IDA to save money towards meeting that goal. IDA goals are usually buying a first home, education or training costs, or funding a small business. Generally, an IDA can be open for up to 3 years though it will depend on the particular program.
The money you put into the account will be matched by other sources. The match may be anywhere from 1 to 4 times the amount of the deposit you make. For example, if you’re enrolled in an IDA program with a 2:1 match and you deposit $50 into your account, the program will add an additional $100 towards your savings goal, so that your total savings for that month will be $150. This means that you will be able to reach your financial goal much more easily and quickly than you could otherwise.
Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.
Generally, to qualify for an IDA:
- Your annual income must be within 200% of the Federal Poverty Guidelines ($30,120 per year for individuals), and
- You must have some form of earned income.
As part of the program, you also need to take financial education classes.
To find an IDA program near you, you can use the Assets for Independence Resource Center website or the Prosperity Now IDA Directory.
Funding Sources
Funding for IDAs comes from a variety of places, including government agencies, private companies, nonprofits, and individual people. Sometimes whether or not the IDA counts as an asset depends on the funding source and what sort of benefits you are getting.
If you are getting Supplemental Security Income (SSI) and you plan to enroll in an IDA, be sure to talk to a Work Incentive Consultant about the details.
Program Eligibility
Each IDA program is different and eligibility requirements may vary from program to program. Most require that:
- Your annual income is within 200% of the Federal Poverty Guidelines ($30,120 per year for an individual, $40,880 for a couple), and
- You have earned income.
For an IDA, you must have income from work. It doesn’t matter if you’re working full-time or part-time, but you must be earning income from some sort of job. The details of the earned income requirements vary depending on the IDA. Be sure to talk to you Work Incentive Consultant about the details
IDA programs funded by the federal government may check on your citizenship or legal residency status when you apply. IDA programs funded by other sources may or may not do this. Be sure to ask about specific citizenship requirements when looking at IDA programs.
Financial Literacy Training
Once you’re enrolled in an IDA program you must take their free financial literacy training. Financial literacy programs improve your ability to manage your personal finances, save more money, and plan financially.
This training usually covers topics like:
- Money
- Debt reduction
- Developing a savings plan
- Credit
- Investing
IDA Savings Limit
Most IDA programs only let you save a limited amount of money in your account, usually $4,000 to $6,000. This includes the money you deposit, as well as the matching funds. Once you reach the limit, you won’t be allowed to deposit any more money into the account. IDA programs also have a limit on how long you can save, usually up to 3 years.
How to Apply
If you are interested in starting an IDA, contact an IDA program in your area. Ask if they are accepting applications. Some programs may have waiting lists. Even if they do, you may be able to start by taking financial literacy training while waiting for a space to open up.
For Arizona residents, a good place to find your local program is the IDA Resources website or the Prosperity Now IDA Directory.
- You need to decide what goals you are trying to meet with your IDA.
- You need to find an IDA program in your area. You can use the the IDA Resources website or the IDA Directory to find one near you.
- You need to find out as much as you can about the IDA program you are thinking about, like:
- Where does the program’s funding come from?
-
What goals does the program fund?
- Federally funded IDA programs only let you save for small business development, higher education expenses, and buying a first home (within a 3-year period).
- Privately funded IDAs may let you save for other goals like buying a new computer or car.
-
Who is the target population for the IDA?
- Some IDA programs are targeted to youth.
- Some IDA programs are specifically targeted to families and homeownership.
Once you find an IDA program that fits your needs, you should go to an orientation meeting to learn more about it.
You will also need to provide information to prove your eligibility for the program. If you get into the program, you will have an IDA caseworker who will help with your account. You’ll open a savings account with a bank or credit union that is connected to your IDA program. Depending on the program, you may need to deposit a certain amount into your account each month.
Once you’ve reached your savings goal and completed the financial education classes, you can take money out of the account to spend on your goal.
For some IDAs, there is a minimum amount of time that you must be enrolled before the matching funds start to add up. The minimums could be 6 months for a business or educational goal and 10 months if you want to buy a home, for example. Once you have fulfilled the minimum requirements — you’ve saved the agreed on amount every month for 6 or 10 months and you’ve taken the financial literacy workshops — you are ready to spend your money.
Some IDA programs will put money directly into your savings account for you to spend. Some IDAs don’t put money directly into your savings account. Instead, the IDA program will calculate how much they owe you in matching funds and make a payment directly to the school, business, bank, or whomever you need to pay to achieve your goal. This is to avoid any illegal or fraudulent behavior.
In any case, the matching amount will not be available until you have met all requirements, are in good standing, and are ready to make your purchase.
Be sure to ask plenty of questions about your IDA before enrolling. Each one is different.
Integration with Other Benefits Programs
IDAs and Supplemental Security Income (SSI)
Because SSI has income and asset limits, working and saving money in an IDA could risk your eligibility. Be sure to talk to your Work Incentive Consultant about the details.
When you enroll in an IDA, you can ask your IDA caseworker to write a letter saying that you can be in the IDA program without losing your SSI benefits, just in case. The letter should mention the “Exclusions Under Other Federal Statutes” clause. Take that letter to Social Security, give a copy to your AHCCCS office, and keep a copy for yourself.
IDAs and Plans to Achieve Self-Support (PASS)
A Plan to Achieve Self-Support (PASS) is an SSI program that lets you set aside money for a specified work goal, such as:
- Starting a new career
- Going back to school
The money you set aside in a PASS does not count against SSI's income and resource limits. This means you can save money towards a career goal in a PASS and continue to use SSI benefits for basics like food and rent.
An IDA can be a part of your PASS plan; the only requirement is that your goal for each program be the same.
As long as the money you save in your IDA is part of a PASS plan, it will not be counted by SSI and won’t jeopardize those benefits.
IDAs and Social Security Disability Insurance (SSDI)
People on SSDI may enroll in any IDA program for which they are eligible. There are no restrictions.
IDAs and the Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is a federal tax program that lowers the amount of income tax owed by low to moderate-income workers and families. Money you get from an EITC can be put into an IDA and matched, helping you to reach your savings goal faster.
Learn more
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