Increasing income is only part of the solution in helping people rise from poverty: Building assets through home ownership, higher education, or entrepreneurship is also essential. Individual Development Accounts (IDAs) are special savings accounts designed to encourage low-wage workers to build assets through matched savings, financial education, and financial coaching. Dr. Michael Sherraden, author of Assets and the Poor and the Director of the Center for Social Development at the Washington University in St. Louis, developed the concept of IDAs in the early 1990s as a vehicle to help people in poverty to accumulate assets.
Family Assets for Independence in Minnesota (FAIM): Statewide IDA Program
Launched in 1999, Minnesota’s statewide IDA program, Family Assets for Independence in Minnesota (FAIM) is made possible through federal, state, and private funding. IDA accounts can be used towards acquisition of one of three assets.
Participants must have incomes below 200% of poverty and commit to saving up to $480 per year, which is matched at a 3:1 rate for up to two years. They also complete 28 hours of financial management classes and 10-14 hours of specific asset training classes, such as first time homebuyer, business development or career development. Between 1999 and 2003, low-wage Minnesotans saved more than $566,000 and purchased more than 300 assets.
In addition to helping participants to acquire assets, IDAs also promote savings behavior and provide social support that contributes to sustainable economic self-reliance and asset-building. This is achieved by providing participants with no-fee bank accounts, which encourages regular savings, and providing financial literacy education and coaching. Frequently, the community organizations offering IDAs also offer other supportive services maximizelong-term success.