In previous issues of Equity, we have introduced readers to Individual Development Accounts (IDAs) – special savings accounts that are matched, at varying rates, up to 8:1 in some situations. In order to save for an IDA, participants must have some form of earned income. Federal IDAs are excludable resources when determining eligibility for Medicaid or SSI (federally funded IDAs are sponsored by the Assets for Independence, or AFI, Program). IDA savers agree to participate in training on financial topics, and may only use their saved funds toward specific goals, including buying a first home, going to college, or starting (or growing) their own business .  Since 2001, over 1,000 New Hampshire residents have taken advantage of AFI IDAs to reach their goals, including many people with disabilities. The New Hampshire Community Loan Fund, the statewide administrator for IDA accounts, offers qualifying New Hampshire residents IDAs with a 3:1 match rate. In other words, for every $25 saved, the participant gets an additional $75. Hundreds of success stories have emerged from the program including that of Richard Johnson, who graduated in October 2009.

Richard’s parents are retired French-Canadian business owners. They are very wise with their investments, and were excellent role models to Richard who learned through the years how to be frugal with his limited resources.   It was always Richard’s dream to follow in his parents’ footsteps. His first attempt at business ownership involved a computer repair business, but it never got off the ground. Richard didn’t give up on his dream, however, and instead pursued a photography business. He began saving in an IDA – each month he saved a portion of wages from his job in a local restaurant. His deposits were matched and he saved almost $6,000 toward his goal. “I worked really hard at saving money and it feels really good,” he says. And work hard they did – at one point, his wife was unemployed and they had to sacrifice to make savings deposits. But IDAs work through a consistent savings habit – missing savings deposits can translate into discontinued eligibility in the program – and Richard kept up the habit.

He went through intensive training in financial literacy, on topics such as banking, saving, and budgeting, as well as training about the mechanics of operating a business. In addition to specifically learning about day-to-day operations of a photography business – such as how to download pictures to his computer – Richard also learned about the essential elements of a business plan. A mentor was located to help support him in his venture, and he determined over time that optimum success would involve finding someone to support his self-employment efforts through the use of Medicaid funding or to co-locate his business with another photographer. 

Throughout the time period that Richard was saving for his business, he and his wife Chrystal got serious about pursing their dream of home ownership.   With a positive credit history in hand, they began looking to buy their own home, but prices were too expensive for their budget. Then, with the help of Richard’s parents, they found a condominium that was affordable and within walking distance to both Richard’s and Chrystal’s jobs. The Johnsons attended a first-time home buyer’s seminar sponsored by Laconia Area Community Land Trust and learned about becoming home owners. Upon completing the program, they were eager to make the purchase. Richard changed his IDA goal to home ownership and his IDA savings paid for their closing costs as well as a modest down payment on their condominium. They were able to secure an affordable loan through US Department of Agriculture - Rural Development and are applying their Section 8 housing voucher to help make their monthly mortgage payments, which keeps their housing payment within their means.  Richard and Chrystal will be getting even more return on their money when they receive their tax refund because of the First Time Homebuyer’s Tax Credit, which is worth up to 10% of their purchase price (up to $8,000) for home purchases made in 2009. The Johnsons also qualify for the Earned Income Tax Credit, which is worth up to $457 this year for a couple without children. Richard and his wife plan on using their refund to pay down the principal on their mortgage.

Richard shared, “Having our own place makes us feel like we’re accomplishing our goals.”  The Johnsons’ experience exemplifies what is possible through hard work, persistence, and by combining a variety of resources together to accomplish their dream.    While saving money isn’t easy for any of us, it is a habit that can really pay off, especially if you qualify for an IDA.