Asset Accumulation Through Individual Development Accounts in Chicago
Judith A. Cook, Ph.Di
A group of people with psychiatric disabilities in Chicago have teamed up with an academic research center, a mental health program, a community development corporation, and banking institutions to accumulate financial assets that promote their economic independence. This involves establishing special savings accounts called Individual Development Accounts. These accounts are geared to the needs of low-income individuals who are working and able to save modest amounts of money. Few IDA programs have been targeted to individuals with disabilities, and this project is one of the first designed for people with psychiatric disabilities.
IDAs are unique because individuals' savings are matched by financial contributions from local and governmental sources. Under the federal IDA program, an individual's savings are matched first by a non-federal source (such as a bank or philanthropic foundation), and second by the federal government using a specific matching formula. The amount of federal funds that may be allocated to an individual's account is $2000 per IDA, while there is no limit on the local match. Individuals' contributions to IDAs must come from earned income and must be used to help finance the purchase of a first home, small business capitalization, or post-secondary education. Participants also receive financial education and counseling. Under the federal program, savings accumulated in an IDA are not counted as assets when assessing SSI or SSDI eligibility or cash benefits, thus removing this disincentive to asset accumulation faced by people receiving public disability income. As of 2003, 34 states, Washington, D.C., and Puerto Rico had passed IDA legislation, with over 500 IDA initiatives and 10,000 IDA savers nationwide.
Funded through a grant to the UIC National Research Center on Psychiatric Disability, the project is being implemented at Thresholds, a psychiatric rehabilitation center serving 5,000 adults through its comprehensive program of supported education, supported employment, housing, and wellness services. The Good City Asset Builders Community Development Corporation is coordinating access to the banking institution and the federal match for this project. The Rebecca Susan Buffett Foundation is providing the local match.
Thus far, five employed clients at Thresholds have received financial education and counseling, assistance with establishing an IDA, and ongoing support. The education program was adapted from a program developed by the University of Illinois Extension Program, and tailored specifically to the needs of people with psychiatric disabilities. This highly personalized, interactive course engaged participants in tracking their expenses, budgeting their incomes, and planning for savings. Classes covered financial management, budgeting, values, tracking expenses, understanding credit, and building savvy consumer skills. Five of the six financial education class participants went on to open IDA accounts. The remaining participant lost her job soon after completing the financial education program, and decided that she needed more time to settle into steady employment before opening her IDA. The five received assistance completing their applications and supporting paperwork. Their eligibility was then verified by project partner Asset Builders CDC (an IDA program in Chicago), and information was collected to meet federal reporting requirements. Finally, the group met with a representative from Charter One Bank who took their initial IDA deposits ($25 each) and opened five IDA savings accounts. Everyone was excited and happy about taking this step toward financial independence as you can see from the picture that accompanies this article.
In the coming months, the group will meet on an ongoing basis to monitor their deposits, learn more about how to realize their particular savings goals, and make detailed plans to reach their goals. Specifically, 3 IDA holders will be saving for a house or condominium, 2 will be saving for post-secondary education or vocational/technical training, and 1 participant is saving for micro-enterprise development. Over the coming months, the group will be visited by specialists in low-income home purchasing, financing post-secondary education, and micro-enterprise development. A project evaluation is tracking participants' asset accumulation and the project's impact on their financial self-sufficiency, along with the likely sustainability of the program at Thresholds after federal funding has ended.
i Judith Cook is the Director of the University of Illinois at Chicago, National Research and Training Center on Psychiatric Disability
For more information about this project, contact Dr. Judith Cook, University of Illinois Chicago, Department of Psychiatry, at email@example.com.