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Saving for the Future

January 8, 2013
By

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(IDAs) change parents' lives to benefit children.

Pam Salcedo

Director of an IDA project

Oakland's Community Housing Development Corporation

Erica Ballinger, a single mother working as an administrative assistant, was thinking about going back to school when she saw a flyer that looked too good to be true.

“It said ‘save money for education and we’ll match every dollar with two,’” recalls Ballinger.

Hopeful, she called the number on the flyer and reached the Low-Income Families’ Empowerment Through Education (LIFETIME), a Bay Area organization of low-income parents — many attending school while on welfare — supporting each other to reach their educational goals.

It was not a hoax.

Through LIFETIME, Ballinger and others like her created an Individual Development Account (IDA), designed to help low-income people save for specific goals such as education, job training, buying a home or starting a business.

Every dollar Ballinger put into her IDA at Citibank was matched by $2 of federal and private funding. Ballinger had to commit to putting at least one dollar into savings every month and to attending a series of financial management trainings.

“If it was a tight month, I only saved $40 or $50,” Ballinger says. “But other months, like when I got my tax refund, I saved the full amount, $200.”

Two-and-a-half years later, Ballinger has saved the maximum amount for her account, $2,000 (which means $6,000 in the bank) to help pay expenses as she heads off to UC Davis Law School.

Creating assets, changing lives

LIFETIME recruits participants, gives them training on financial management, and helps them stay on track.

“If an account holder hasn’t made a deposit three weeks into the month, we give them a friendly call,” says Program Director Anita Rees.

To offer IDAs, community-based organizations partner with financial organizations, which work with banks and federal and private funders to create the accounts and find matching funds. For example, LIFETIME works with participants and partners with San Francisco Earned Asset Resource Network (SFEARN), which handles the banking and financing for IDAs for a number of community groups.

IDAs “change parents’ lives to benefit children,” says Pam Salcedo, director of an IDA project for Oakland’s Community Housing Development Corporation.

Many studies show that low-income children do better academically and socially when families have more income and stable housing.

Little things add up

Anna Marie Rivero, a 32-year-old single mother of two, was finishing up her B.A. when she and two friends signed up for the LIFETIME IDA program. Eight months later, Rivero says she already saved almost $1,000.

“Something that’s really helped me to keep up with my savings is the financial counseling and training,” says Rivero, who is living with her parents, working part-time as an occupational therapist, and saving to go back to school.

Rivero says the best part of the program was the week when they wrote everything down that they spent.

“You realize how much little things add up,” Rivero says. “I’d been buying coffee every day, but I saw that maybe I need to make it at home and lug it around….Their whole point was that that money could go into your savings.”

Not for everyone

IDAs can be “a significant step for families,” Salcedo says, but “many of the families we serve aren’t quite ready for IDAs.”

To build a successful IDA, a family needs to be in a stable living situation and have a stable income, according to Salcedo. That’s why it’s so important for IDA programs to partner with programs that provide other kinds of supports, such as helping parents find jobs and housing, Salcedo adds.

Policy goal: change on a bigger scale

“IDAs work,” says Ben Mangan, director of San Francisco Earned Asset Resource Network (SFEARN). “But if we’re going to make them a larger, sustainable solution available to much larger numbers of poor people, we’re going to have to have policy changes on a bigger scale.”

That’s why the San Francisco Earned Asset Resource Network (SFEARN), which has helped people set up IDAs since it began in 2002, also advocates for public support for IDAs.

On the federal level, the Department of Health and Human Services provides matching funds for IDA accounts through the Assets for Independence program and the Office of Refugee Resettlement. To qualify, a family must have an income under 200 percent of the poverty level, or about $37,000 a year for a family of four. Advocates are pushing for a higher income ceiling.

“There are so many people [in the Bay Area] who are poor, who make more than double the federal poverty level,” Mangan says.

Originally written by Eve Pearlman.