Individual Development Account (IDA)

What Is an Individual Development Account (IDA)?

An individual development account (IDA) is a type of savings account intended to assist low-income individuals with building assets and accomplish financial stability and long-term independence. Individuals use IDAs to set aside cash to begin a business, pay for education, or buy a home.

Understanding Individual Development Accounts (IDAs)

IDAs assist with peopling build financial stability in more than one way. To meet all requirements for an IDA, an individual might need to complete free financial literacy training, which shows subjects like money management, debt reduction, and investing.

An IDA will likewise assist with making savings go farther: As in a 401(k), the money a person saves in an IDA is then matched (in this case by private or public funds), expanding the total account value. Participants open an account with an approved financial institution and set aside recurring installments over a set period of time. The funds are then matched, frequently at a 2:1 or 1:1 ratio (the exact amount matched fluctuates relying upon the state and program).

To fit the bill for an individual development account, participants must meet specific criteria related to income, assets, and employment.

Program qualification criteria shift by program, however most expect that your income be under two times the federal poverty level, that you have income from a job, and that you go to financial literacy programs. Different criteria could incorporate meeting certain asset limits, your citizenship or legal resident status, and having credit.

History of Individual Development Accounts (IDAs)

IDAs began during the 1990s as a method for lessening poverty. In the late 1990s, IDAs began to receive federal funding from the Assets for Independence Act (AFIA) and the Temporary Assistance for Needy Families (TANF) program. There are many IDA programs across the country.

Be that as it may, the Assets for Independence (AFI) program behind numerous IDAs was undermined starting in 2017. From that point forward, individual states have been working to fill in the gaps in funding.

Special Considerations

Having an IDA won't hurt your supplemental security income (SSI) benefit, assuming that you receive one. That is on the grounds that the money you deposit, the matching funds, and any interest you earn don't count as earned income.

Features

• To meet all requirements for an IDA, an individual might need to complete free financial literacy training, which shows subjects like money management, debt reduction, and investing.
• An individual development account (IDA) is intended to assist low-income individuals with building assets and accomplish financial stability and long-term independence.
• Individuals use IDAs to set aside cash to begin a business, pay for education, or buy a home