Building Assets for the Rural Future

Sponsor Individual Development Accounts & Child Development Accounts

Sponsor Individual Development Accounts & Child Development Accounts

The Opportunity

Individual development accounts (IDAs) are matched savings accounts geared toward low- and moderate-income households to assist them in saving for an investment in a major asset, such as a home, education, or a business.  The participant places money in the IDA savings account and attends financial education courses. If the savings goal is reached within the allotted time (usually one to four years), the savings will be matched by some multiple—but only if the entire amount is invested in one of the qualifying assets.[1] IDA savings programs are based on two premises. First, research indicates that low-income individuals—with the proper supports and structured opportunities—are capable of saving money and building assets.[2] Second, the resulting asset accumulation is likely to be accompanied by such benefits as increased educational attainment, better health outcomes, and increased local civic participation, among others.[3]

Child development accounts (CDAs) are similar to IDAs, but they are typically opened within the first few years of a child’s life. The advantage of CDAs is that they will be held for a longer period of time and will therefore provide greater financial benefits to the child.  Additionally, the CDA itself serves as an example for the child—and for any involved caregivers—of the benefits of savings,[4] and studies have shown that child savings leads to positive effects on educational performance and achievement.[5]

How the Tactic Is Applied

Form Necessary Partnerships to Deliver IDA Programs to Rural Residents

Wilson Community Improvement Association and Wilson County Department of Social Services (North Carolina)
Western Carolina Community Action (North Carolina)
Southern Good Faith Fund (Arkansas)

Rural communities that administer IDA programs face special challenges related to their lower population density. Required financial education courses may not be available locally, so it may be difficult for some rural residents to meet an education requirement as part of an IDA program. Additionally, rural residents tend to experience more frequent job losses, making long-term asset development more difficult.[6]  Finally, lower population density and transportation hurdles may make it difficult to identify and recruit participants, qualified staff, and financial partners.

In Wilson County, North Carolina, the Wilson County Department of Social Services and Wilson Community Improvement Association (WCIA) partnered to provide a homeownership IDA program for low-income county residents.  Each partner brought important expertise to the table. Wilson County DSS had established programs to provide financial education and coaching to low- and moderate-income rural residents.  WCIA possessed proficiency in assisting low- and moderate-income rural residents to become homeowners through homeownership counseling and credit repair programs. Together, as part of a single IDA program, Wilson County DSS provides the required financial education and coaching services to program participants, and then successful participants work with WCIA to obtain homeownership counseling and assistance with the home buying process. A similar model is employed by Western Carolina Community Action, which relies on several different partners for delivery of its IDA program. For example, local churches assist by marketing the IDA program and providing space in which to hold associated financial education classes, and local businesses are enlisted to provide some portions of the training.[7]          

Southern Good Faith Fund (SGFF) works in impoverished rural areas in the Delta of Arkansas and Mississippi, and yet still operates one of the oldest, largest, and most successful rural IDA programs in the country.  To make the program work in these rural areas, SGFF partnered with more than twelve different banks or credit unions that are familiar with their local communities in order to offer no-fee banking accounts and other bank services to program participants.[8]    

Learn More

Pat Malinak
Program Designer
Western Carolina Community Action
Hendersonville, NC
828-890-2632 malinakpa@gmail.com

Barbara Blackston
Executive Director
Wilson Community Improvement Action Association
Wilson, NC

On the Internet

Low-Income Families Building Assets: Individual Development Account Programs Lessons and Best Practices

North Carolina Department of Labor – Individual Development Account Program

Asset-Building & IDA Collaborative of NC

[1] Funding sources are available in North Carolina for the matched savings portion of these accounts, but funding for administrative costs is more difficult to find. See Lucy S. Gorham, Roberto G. Quercio & William M. Rohe, Low-Income Families Building Assets: Individual Development Account Programs Lessons and Best Practices 52-58 (2002), available at https://curs.unc.edu/files/2013/04/IDAfinalreport.pdf.

[2] Michal Grinstein-Weiss, Kristen Wagner, & Fred M. Ssewamala,, Saving and Asset Accumulation Among Low-Income Families with Children in IDAs  (2005), available at http://csd.wustl.edu/Publications/Documents/WP05-09.pdf Mark Schreiner, et al., Savings and Asset Accumulation in Individual Development Accounts  (2001), available at http://www.microfinance.com/English/Papers/IDAs_Savings_and_Asset_Accumulation_in_ADD.pdf.

[3] See above note 1.

[4] Vernon Loke & Michael Sherraden, Building Assets from Birth: A Global Comparison of Child Development Account Policies (2008), available at http://csd.wustl.edu/Publications/Documents/WP08-03.pdf Min Zhan, Assets, Parental Expectations and Involvement, and Children’s Educational Performance, 28 Child. and Youth Services Rev. 961(2006).

[5] Lisa Reyes Mason, et al., Child Development Accounts and Saving for Children’s Future: Do Financial Incentives Matter? 13 (2009), available at http://csd.wustl.edu/Publications/Documents/WP09-54.pdf Grinstein-Weiss, Wagner, & Ssewamala, above note 2.

[6] Ibid.  Michal Grinstein-Weiss, Jami Curley & Pajarita Charles, Asset Building in Rural Communities: The Experience of Individual Development Accounts, 72 Rural Soc. 25(2007).

[7] Interview with Pat Malinak, Special Projects Director, Western Carolina Community Action (Apr. 19, 2010).

[8] Southern Good Faith Fund, Impact Report: Asset Builders September 2007 (2007), available at http://southernpartners.org/assets/archived_publications/pub_raida/ab_impact_9_07.pdf.

Topics - Courts and Judicial Administration