There is a long held myth that low income individuals cannot save money. However, the Oregon IDA Initiative is proving otherwise. Individuals Development Accounts, or IDAs, are a matched savings program that builds the financial management skills of low income Oregonians while they save towards a goal – homeownership, business development, higher education, or an employment opportunity. IDAs support movement out of poverty, encourage wealth creation in low income communities, and provide models for economic success to individuals and their communities. IDAs are an important tool for building personal assets and wealth, providing access to financial education, banking the unbanked, and supporting entrepreneurship and business development.
This summer we will celebrate our 1000th graduate from the Oregon IDA Initiative. That’s exciting news and we’re gearing up for one heck of a party! But what’s even more exciting is what we are hearing from these graduates after they leave our program. First – a little background. To participate in the IDA Initiative an individual must be a member of a low income household. To give you an idea, an individual living in Marion County could not earn more than $31,800 a year and could not have more than $20,000 in assets (excluding their car and their home),. They must also agree to complete a series of classes on financial education and classes specific to the asset they are saving for such as home buying classes. While in the program they are required to make regular deposits to a savings account. Once they reach their savings goal their savings are matched $3 for every $1 they saved!
Last January (2008) Neighborhood Partnerships contracted with Portland State University’s Regional Research Institute to conduct an outside evaluation of graduates of the Oregon IDA Initiative one year after purchasing their asset and completing the program. While the normal return rate for such surveys is 20% at best, 30% of our graduates responded, and what they had to say was promising.
In the area of their financial wellbeing, participants report impressive results at graduation:
- Satisfaction with their financial status grew from 46% to 78%.
- “Very satisfied” grew from 7% to 26%!
- 45% reported reduced debt.
- 44% reported increased income.
Their ability to make regular deposits to savings grew from 23% to 65%, and nearly 70% of program graduates reported using a budget to monitor their monthly spending.
The other exciting news, we are seeing is that OR IDA Initiative graduates are now able to plan ahead for both good times and bad. One year after program graduation, the OR IDA Initiative graduates reported lasting changes in their financial lives:
- 59% often use a budget to monitor expenses.
- 41% regularly make deposits into a savings account.
- 34% were saving for a vacation (something that often is put on a credit card).
- 27% were saving to purchase or improve their home.
- 25% started an IRA account
In addition to its positive impact in the lives of individual Oregonians, the OR IDA Initiative is changing communities for the better. Since 2003, the Initiative has helped to start or expand 359 locally owned small businesses in Oregon and helped 212 Oregonians from all parts of the state obtain post secondary educations. Better access to education and the jobs that small businesses help create have broadly felt positive impacts. In addition, the Initiative has helped 413 Oregonians become first time home buyers.
These are encouraging results and go to show that even those with little income are willing and able to save in order to build a better future for themselves. The matching funds provide the incentive they need to purchase their assets and move into the middle class. It’s a small investment with a big return. Stay tuned as we await future results from our grads.
