Wondering if you'll ever do more than just get by?
The answer might be an "individual development account," or IDA, a savings plan that kicks in $2 or $3 for every dollar saved so lower-income Americans can:
- Buy homes.
- Start small businesses or expand existing ones.
- Go to college or trade school (or send children there).
In return, you must take financial-education classes and deposit at least $20 a month, up to $2,000. That means you can get up to $6,000 for free. Sort of.
"It wasn't just a handout. You had to earn it," says Christen Poe, a Virginia mother of two who works for a county health agency.
She and her husband, a corrections officer, went through 14 hours of IDA classes (complete with homework) at Beans and Rice, a Pulaski, Va., economic development organization for low- and moderate-income families. At the time, their "home" was a one-bedroom apartment over a family member's garage.
"We both work our tails off, but we could just not get ahead," Poe says. Wages of $8 an hour are pretty standard in their area.
Now they have a four-bedroom house. Without the IDA program, they'd probably still be in living above the garage. "Nobody would look at us to finance because we had no down payment," Poe says.
"Lower income" doesn't necessarily mean impoverished. A single person earning $21,660 is eligible; so is a four-person family living on $44,100.
If you make a little too much to qualify for an IDA, you can still find ways to save. "An emergency fund out of thin air" and "9 sneaky tips for saving more" both give techniques for squirreling away the lucre. For a jump-start bonus, see "Get free money from banks." If funding retirement is your goal, remember the tax benefits of the saver's credit.
Are you eligible?Individual development accounts were created under the federal Assets for Independence Act in 1998. Under the law, about $24 million a year gets distributed to more than 200 community-based nonprofits and government agencies.
You can apply if your adjusted household income is equal to or less than 200% of the federal poverty level and if you have no more than $10,000 in assets. Home or car ownership does not necessarily rule you out, and student loans and consumer debt are included in your total assets.
Although you must be employed to apply for an IDA, it doesn't necessarily have to be full time. "I've had people who had odd jobs who qualified," says Brendan Wilbur at Alternatives Federal Credit Union in Ithaca, N.Y.
Adrianna Hirtler, 34, has several jobs. During summers, she works at Yosemite National Park; the rest of the year she's a substitute teacher in Ithaca and occasionally runs training classes for overseas workers.
Determined to start her own business, Hirtler enrolled in Alternatives Federal's financial-education program two years ago. The classes taught her to think about money "in a more efficient way" and required her to create a business plan for what became Place Odyssey and the Art of Walking, a company that conducts specialized and gourmet walking tours in the Finger Lakes area of upstate New York.
Thus far the $3,000 from IDA has paid for an upgraded computer and printer plus the software to design a Web site and brochures.
"I'm able to print my own fliers and materials, which really (would otherwise) cost quite a lot of money," Hirtler says.
Getting better at managing moneyAn individual development account isn't just about the money, though. "It's about establishing behaviors about money," says Eric Bucey, a spokesman for Beans and Rice. "In America -- and you see this across income backgrounds -- we're not very good at managing our money."
Along with basic budgeting, an IDA course might include topics such as credit cards, insurance, retirement, mortgages, taxes, debt repayment and setting financial goals. Such topics aren't always taught in school or at home.
Depending on the program, it may be possible to skip a month or two, or even to withdraw and restart later. But an IDA participant cannot earn matching funds without completing coursework and savings requirements. If you drop out for good, you'll get back only the money you put in.
Once you complete the program, the money is paid out in ways that specifically support your goal -- for instance, college tuition, the down payment on a mortgage, rent for your new hair-braiding salon.reinvent themselves. People with strong money management skills will need fewer, if any, social services.