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FREQUENTLY
ASKED QUESTIONS
Asset-Building and IDAs
What is an Individual Development Account (IDA)?
What are the conditions attached to an IDA?
Why not just give income support instead of matching savings?
Where does this policy option come from?
Q: What is an Individual Development Account or IDA?
A: An IDA is a savings account held by a low-income person
and made up of regular savings contributed by the participant, which are
matched by contributions from the federal government or other sources. The
matched contributions can only be put towards certain restricted uses such
as education, training or micro-enterprise capitalisation, or home ownership.
Support services such as financial management training, savings counselling
and monitoring come with the account.
Q: What are the conditions attached to an IDA?
A: IDAs are targeted to low-income Canadians, particularly
the working poor. Limits are set on the ratio of matched funds to savings,
the total savings amount, the savings period, as well as what the savings
may be used for. It's also important to note that the matched contributions
are never paid directly to the participant but instead are paid directly
to the vendor of the good or service being purchased. For example, the matched
funds would be paid directly to a community college once the participant
has enrolled in a program.
Q: Why not just give income support instead of matching
savings?
A: Income meets immediate short-term needs, but assets
help build futures. Savings and assets cushion against unexpected changes
that affect income, such as a job loss, and leverage other opportunities
for asset accumulation. Even a small amount of savings will allow low-income
Canadians to enhance their own human capital in ways that may offer limitless
returns.
Q: Where does this policy option come from?
A: IDAs are
the brainchild of Michael Sherraden, Professor at the Center for Social
Development at Washington University in St.Louis. In the late 1980s, Sherraden
began conducting extensive research on the impact of assets on poverty.
He concluded that assets can make a significant social and economic difference
in people's lives. He also concluded that existing social policy was preoccupied
only with consumption and that provisions to enable the poor to acquire
assets needed to be introduced into public policy. His work and that of
the Corporation for Enterprise
Development have led to a widespread IDA movement in the US including
federal and state legislation supporting IDAs in more than 250 communities.
There is now considerable anecdotal evidence that IDAs can have a positive
impact on the attitudes, behavior and economic circumstances of poor Americans.
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