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Mile High United Way accountholder

Mile High United Way accountholder. Stephanie Wooten. A Presentation on IDAs and Asset Building May 2007 NAMHPAC Pre-Conference Workshop – Joint National Conference. Emily Appel CFED 777 North Capitol St., NE Suite 800 Washington, DC 20002 eappel@cfed.org

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Mile High United Way accountholder

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  1. Mile High United Way accountholder Stephanie Wooten

  2. A Presentation on IDAs and Asset Building May 2007NAMHPAC Pre-Conference Workshop – Joint National Conference Emily Appel CFED 777 North Capitol St., NE Suite 800 Washington, DC 20002 eappel@cfed.org Note – Emily can no longer be reached at CFED, please contact NAMHPAC, or CFED directly for questions.

  3. CFED • Our Mission: Ensure that every person can participate in, contribute to, and benefit from the economy. • Strategy: Expand asset building and economic opportunities by bringing together community practice, public policy, and private markets in new and effective ways. • Method: Identify new ideas, find what works, help new ideas reach scale, and foster new markets to achieve greater economic impact.

  4. Why assets matter • Assets provide benefits that income alone cannot provide, such as a financial cushion and a psychological orientation toward the future and toward one’s children

  5. But Americans are asset poor • Nearly one in five households owes more than it owns (21 million). • One in four female-headed households has zero or negative net worth. • One in three minority-headed households has zero or negative net worth. • One in four families (26 million) does not own enough to subsist at the poverty level ($4,875 in income) for three months.

  6. Disability and Asset Poverty • One-third (34%) of adults with disabilities live in households with total income of $15,000 or less compared to only 12% of those without disabilities • NJ program: 90% of clients rely on SSI/SSDI, and those that are employed take home only $8000-$10,000/year • 10% of people with disabilities own homes compared to 71% of those without disabilities

  7. Disability and Asset Poverty (cont’d) • 58% of people with disabilities are asset poor (do not have enough resources to live at the federal poverty level for three months) • 54% of people with disabilities have no savings accounts, and 69% have no checking accounts • Even if they are employed, it is assets, not income, that allow people to move out of poverty and achieve economic independence

  8. Federal Government Response • The federal government spends $362billion a year to promote asset building. • HOWEVER, that number is highly skewed to upper-income citizens. • The top fifth (those with household incomes greater than $80,000) received the vast bulk (88.7%) of the asset-building benefits. • In contrast, the rest of the population shared 10.5% of the tax benefits, and the lowest 60% of households got less than 3% of the benefits.

  9. What is an Individual Development Account? • Individual Development Accounts (IDAs) are matched savings accounts designed to promote asset building and change savings behaviors • Participation involves at least 10 hours of general financial education, plus additional asset-specific education

  10. What can IDAs be used for? • Primary uses of IDAs: • Homeownership – downpayment and/or acquisition costs • Microenterprise – seed capital for entrepreneurs to start up their own businesses • Education – tuition for post-secondary education for accountholder or dependent

  11. Benefits of IDAs • In addition, the IDA program gives families the skills to manage their money and save for the future, through financial and economic education • Financial education is training designed to help families acquire the information and skills necessary to take control of their personal finances • Financial education increases savings rates among adult IDA holders • Access to other financial supports, like credit counseling and tax preparation

  12. IDA Income Qualification(AFI Guidelines) • IDA participants must meet each of the following requirements: • Income test: household income must be below 200% of the Federal Poverty Level Family SizeGross Income 1 $20.420 2 $27,380 3 $34,340 4 $41,300 • Net worth test: the net worth of the household cannot exceed $10,000

  13. Who operates IDA programs? • IDAs are primarily offered by nonprofits that do the recruitment, casework, and financial education, in partnership with financial institutions that can hold the accounts • Currently there are over 500 programs in the US, serving 30,000 accountholders Find updated list of programs at www.idanetwork.org >> IDA Directory

  14. Map of IDA Programs

  15. Other components of a comprehensive asset building and financial education agenda • Improving and expanding access to financial education • Increasing affordable homeownership opportunities • Promoting state-level Earned Income Tax Credit (EITC) legislation and expanding use of the federal EITC • Creating new savings opportunities for higher education • Supporting children’s savings accounts • Increasing access to retirement savings opportunities • Implementing anti-predatory lending measures

  16. IDA and Asset Building Resources on the Web • CFED’s IDAnetwork www.idanetwork.org • Center for Social Development http://gwbweb.wustl.edu/csd/ • New America Foundation www.assetbuilding.org

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