Individual Development Accounts: Policies to Build Savings and Assets for the Poor

Abstract

Individual Development Accounts (IDAs)—matched savings accountsfor low-income households—are a relatively new means of improvingthe lives of the poor. Advocates of IDAs argue that those with assetsare more economically secure, have more options in life, and can pass onstatus and opportunities to future generations. They further argue thatassets have positive social, psychological, and civic effects that areindependent of the effects of income. Over the last decade, research anddemonstration projects have been initiated to address these claims; someof the key findings are that IDAs do lead the poor to save or acquireassets, but do not necessarily increase their net worth (assets minusdebt). While costs are declining, IDAs are expensive to administer and areoften used by the poor as checking and savings accounts as well as ameans to accumulate wealth, reflecting in part the dearth of savingsproducts aimed at the poor.