individual development accounts idas andrea olson north dakota community action partnership

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Individual Development Accounts IDAs Andrea Olson North Dakota Community Action Partnership 701-232-2452 800-726-7960 [email protected] Community Action Agencies. Non-profit agencies throughout the United States including North Dakota - PowerPoint PPT Presentation

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  • Individual Development AccountsIDAs

    Andrea OlsonNorth Dakota Community Action [email protected]

  • Community Action AgenciesNon-profit agencies throughout the United States including North Dakota

    Encourage self-sufficiency for low-income individuals and families through programs, services, and community building

    1,000 agencies operating nationallyNorth Dakota has seven CAAsServe all 53 counties across state

    Assist 11 million individuals per year- North Dakota CAAs served 20,979 individuals in 2009

  • Programs and ServicesAsset DevelopmentCase ManagementHead StartEmergency Services- rental assistance- utility assistanceHousingNutritionSeniorsWeatherizationSportsmen Against Hunger

  • ND Community Action PartnershipEstablished 1976

    Enhance capacity and program service delivery

    Technical assistance

    Poverty training

    Research

    Public relations

    Organizational effectiveness

  • Community Action Agencies in North DakotaSoutheastern North Dakota Community Action - FargoCommunity Action Region VI - JamestownRed River Valley Community Action Grand ForksDakota Prairie Community Action Devils LakeCommunity Action Opportunities - MinotCommunity Action Partnership Regions I and VIII Dickinson and WillistonCommunity Action Program Region VII - Bismarck

  • IDA OverviewMatched savings accounts for low to moderate-income individuals

    Utilized towards the purchase of a lasting asset

    Eligible assets:- First home- College- Small business capitalization

  • IDA History and TheoryMichael Sherraden, Assets and the PoorPeople are trapped in a cycle of consumption and dependence in current public assistance system Need long-term solutions to poverty rather than maintenance efforts

    American Dream DemonstrationNational five-year program (1997)Found that low-income people could save and accumulate assetsAverage savings of $19.06/mo + lump sum deposit = $700 annuallyWhen matched 2:1 lays a foundation for asset accumulation-Help people get ahead by focusing on the future and setting long-term goals to become self-sufficient

  • IDAs Across the U.S.Assets for Independence Act 1998 (AFI)- Federal support of IDAs- Protects IDA from being used when applying for other services (TANF, Pell Grant)

    500+ IDA initiatives nationwide

    Over 44,000 participants

    Saved over $36.8 million

    Many states have passed IDA legislation

  • IDAs in North DakotaHistoryInitiated in 2002 by SENDCAA, RRVCA, and DickinsonExpanded to encompass remaining regions2006 partnership with South Dakota CAAs

    Statewide program across North Dakota

    North Dakota Community Action PartnershipAdministers the program across the state

  • IDAs and Community Action AgenciesMarie J. Hawe, Community Action Agencies and IDAs: A Natural Partnership

    Long-standing relationships and experience with target population

    Operate many programs that can be linked with IDAs

    Strong relationships with several community partners

  • Eligible Assets to Purchase with IDA First homeDown payment, closing costs

    Small business start-up or expansionInitial inventory, equipment, marketing

    CollegeTuition, books, fees, and certain required supplies

    *All assets must be purchased in ND

  • Participant Eligibility GuidelinesCurrent ND household income of less than 200% of povertyDepartment of Human Services publish federal poverty guidelines annually2009 Guidelines: Household of 1 = $21,660, Household of 2 = $29,140 -Add $7,480 for each household member

    Net worth does not exceed $10,000-Car and primary residence are excluded

    Documented employment history

    North Dakota resident

    Willingness to participate in necessary trainings

    Ability to save for a minimum of six months Demonstrating consecutive monthly savings

  • Application and Enrollment ProcessComplete application and submit to appropriate Community Action AgencyApplication is available online or can be requested Income verification (household)Credit score/report

    Acceptance into IDA program is contingent on: -Meeting income and credit requirementsAvailability of slots

    Open custodial IDA account at bankRegular monthly depositsOnly emergency withdrawals are allowed

  • Ongoing Case Management with IDA CoordinatorResearch asset to be purchased

    Budget creation and monthly review

    Financial planning

    Career exploration

    Referrals for necessary trainings

    Work plans (detailed)

  • IDA Savings RequirementsDeposits must come from earned income

    Must be made regularly each month

    Minimum monthly deposit of $25 is expected

    $500 per year may come from EITC

    Savings must be for at least 6 months

    Graduation goal is a two-year period

  • North Dakota IDA Match BreakdownMaximum matched savings amount is $2,000

    Match rate is 2:1If full $2,000 is saved an additional $4,000 will be earned

    Interest is earned but not matched

    Participant can earn $6,000 by end of savings period:$2,000 Personal savings$2,000 Federal AFI match$2,000 Non-federal match

  • Financial Literacy Education10 hours requiredOffered by Community Action Agency or various community partnersClassroom setting, one-on-one trainings offered

    General topics covered:Bank servicesBorrowing, creditCheckingSavings AccountsBudgetingLoansHomeownership

  • Benefit of Making More than the Minimum Payment

    Original BalanceAPRMonthly PaymentsTotal # of Monthly PaymentsTotal Years to Pay OffTotal of Payments$250018%Minimum Payment (MP)12310$3915$250018%MP + $25504$3258$250018%MP + $50333$2839

  • Predatory Lending TrapsSOURCE: Aspen Institute Community Strategies Group

    Check CashingBuy Here/Pay Here Car DealershipsPayday LoansRefund Anticipation LoansRent-to OwnTitle LoansServe those without bank accountsSell bad cars to desperate customersLoans secured by post-dated checkShort-term loans by tax preparation chainsRent goods at high interest ratesFastest growing and least regulatedCharge 3-7% of checks face valueCharge 50-100% more than what car is worthTypical cost is 650-780% APR235% APR to get refunds 5-7 days earlier$200 TV would typically cost $700Short-term loans secured by car titleGateway to other predatory loansHigh interest (25% APR and up)$500 for two weeks typically costs $625Cost poor families $900 million in 2006Interest rates range from 100-300% APRTypically charge 300% APR

  • Asset Specific EducationEight hours requiredOffered by numerous community partners

    General asset-related topics covered:Affordability of homePurchase process and maintenance after purchaseFree Application for Federal Student Aid (FAFSA)Career and education explorationDeveloping business planDetermining marketing strategies

  • Asset Purchase ProcessAllowable after completion of at least six month consecutive savings period and required trainings

    Participant notifies IDA Coordinator to initiate process-Necessary paperwork is completed

    Participant savings in the IDA are matched 2:1 -Not required to save full $2,000 but it is strongly encouraged

    Check for asset purchase is issued directly to vendor-No match money is deposited into IDA or made payable to participant under any circumstances

    Multiple withdrawals allowed (max. 3)

    Asset must be purchased in ND

  • ND IDA Legislation2009-2011 BienniumBi-partisan and bi-cameral support62 new slots created across the stateSigned into law by Gov. John Hoeven April 29, 2009Anticipated return on investment:-$375,000 invested in lasting assets-Over 100 households will complete financial and asset training-Participants will have saved over $100,000 for assets-Increase in self-sufficiency and a decrease second-tier financial services

  • Region 8 Homes 0Education 10Small Business - 1Region 7Homes 2Education 5Small Business - 1Region 6Homes 1Education 3Small Business - 0Region 5Homes 2Education 11Small Business - 3Region 4Homes 10Education 10Small Business - 0Region 3Homes 2Education 4Small Business - 1Region 2Homes 0Education 10Small Business - 0Region 1Homes 1Education 3Small Business - 0IDA Current Savers in Each Region* As of 7/12/10

  • Region 8 Homes 0Education 7Small Business - 0Region 7Homes 0Education 2Small Business - 0Region 6Homes 0Education 2Small Business - 0Region 5Homes 6Education 5Small Business - 2Region 4Homes 6Education 1Small Business - 2Region 3Homes 0Education 0Small Business - 1Region 2Homes 4Education 0Small Business - 0Region 1Homes 0Education 0Small Business - 0IDA Graduates in Each Region* As of 7/12/10

  • Region 8 Homes 0Education 17Small Business - 1Region 7Homes 1Education 5Small Business - 1Region 6Homes 1Education 4Small Business - 0Region 5Homes 8Education 17Small Business - 4Region 4Homes 14Education 9Small Business - 2Region 3Homes 3Education 3Small Business - 2Region 2Homes 4Education 10Small Business - 0Region 1Homes 0Education 3Small Business - 0IDA Graduates in Each Region by 2011* As of 7/15/10

  • Applicant Demographics

  • Gender

    Chart1

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    0.78

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    Male22%

    Female78%

    To resize chart data range, drag lower right corner of range.

  • Ethnicity

    Chart1

    0.04

    0.07

    0.02

    0.86

    0.01

    N=107

    Sheet1

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    African-American4%

    Native-American7%

    Asian-American2%

    Caucasian86%

    Hispanic1%

  • Age Group

    Chart1

    0.07

    0.5

    0.29

    0.07

    0.07

    N=107

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    Under 197%

    20-29 Years50%

    30-39 Years29%

    40-49 Years7%

    50 Years and Older7%

  • Marital Status

    Chart1

    0.6

    0.17

    0.03

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    N=107

    Sheet1

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    Single, Never Married60%

    Married17%

    Separated3%

    Divorced20%

  • Employment Status

    Chart1

    0.5

    0.35

    0.01

    0.14

    N=107

    Sheet1

    N=107

    FT Employed50%

    PT Employed35%

    Unemployed1%

    Student14%

  • Educational Attainment

    Chart1

    0.05

    0.19

    0.03

    0.42

    0.07

    0.18

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    Sheet1

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    Completed 9-115%

    HS Diploma19%

    Vocational Degree3%

    Some College42%

    Associate Degree7%

    BA/BS Degree18%

    Some Graduate School5%

    MA/MS1%

  • Income Range

    Chart1

    0.48

    0.19

    0.24

    0.09

    N=107

    Sheet1

    N=107

    Below 100% of Federal Poverty Line48%

    100-150% of Federal Poverty Line19%

    150-200% of Federal Poverty Line24%

    Unknown9%

  • Amanda purchased her first home with an IDA! September 2009

  • Britney DickinsonUND Senior, Business Administration

    I had my own personal savings, but not enough to cover four years of college. The money from my IDA went toward my senior years tuition and really helped me in setting goals with money. It was encouraging for me to put as much into the account as possible because I knew it would be matched times two. I looked forward to getting my statements each quarter to see my progress. I am very grateful that I qualified for this program and I recommend it to others to utilize to achieve their educational goals.

  • Michelle FargoSmall Business Owner

    Through the IDA program I have saved over $1,600 and it has been matched 2:1 therefore cumulatively I have received $4,800. With these dollars I have purchased photography computer software, studio props, paid a portion of studio rent, and rented a Santa for holiday picture packages. Without the IDA I would have not had the resources to make these purchases and expand my business. I never thought my dream would become a reality! I am so proud of my business, my studio is beautiful, high ceilings, perfect set-up, low rent!

  • Linda Grand ForksSmall Business Owner

    My plan was to purchase a home the summer of 2007 and have all the paper work done by 2008. I participated in all the required classes thinking that my goal was homeownership. In the spring of 2007, I had major medical issues to handle and so I was faced with changing my goal. I proceeded to take all the new required classes and met with a business consultant to develop my business plan. When I was able to realize the goal and recognize the great benefit this program has to offer, I pushed to save more money. My total savings with the matching funds was over $4200.00! My studio is more conducive to learning and allows more avenues of developing the various aspects of music to allow students to expand their knowledge and skills in music.

  • Effects of IDAs and Asset OwnershipStability and Personal Empowerment-Strengthen FamiliesDecrease of generational poverty

    Increased civic involvement

    Outstanding economic impact-Property taxes-College education = better jobsJob creationHuman capital investment

  • Effects of IDAs and Asset OwnershipPromote economic independence Bridge to the middle class

    Teach slow and realistic savings

    Combine private and public support

    Build financial knowledge and skills

    Deliver measurable outcomes

  • ND IDA Program RecapPotential participants must income-qualify and be able to make deposits from earned income

    Upon acceptance an IDA is opened at the participating financial institution and monthly deposits begin immediately

    Participants work with an IDA Coordinator in their region to complete financial literacy and asset-specific trainings in addition to case management

    Upon completion of trainings and demonstration of consecutive savings, the participant is eligible to receive a 2:1 match to their savings to purchase their approved asset

  • Frequently Asked QuestionsCan I change my mind about what asset Im going to purchase?Yes, you would have to notify your IDA Coordinator and it would still have to be one of the three approved assets; a first home, small business, or college tuition.

    What happens if I drop out of the program?-You would get all of the money you had saved returned to you but you would not be eligible to receive any match funds.

  • Frequently Asked QuestionsIm currently in High School, can I participate?Yes, but you have to be at least a Junior and have parental consent.

    Even though I qualify now, what happens if my income increases?-Once you have been proven eligible and accepted into the program, eligibility is locked in. Participants need only be income eligible at time of enrollment and acceptance.

  • Frequently Asked QuestionsDo I have to currently be employed to qualify for an IDA?Yes, federal regulations clearly state that deposits into an IDA must come from earned income.

    Where are savings into the IDA deposited?-Accounts are held at various financial institutions across North Dakota. We work primarily with Bremer Bank. Accounts do not incur any service fees and do accrue interest.

  • Frequently Asked QuestionsI attend a two-year college, can I participate in the IDA program?Absolutely! The IDA program can be utilized at any accredited post-secondary institution in North Dakota towards an Associates Degree, a Bachelors Degree, Masters Degree, or Post-Doctorate Degree.

    The IDA program sounds too good to be true. What is the catch? Is it a loan?-Its not too go be true! The IDA program is an excellent opportunity to accumulate a lasting asset. There really is no catch and nothing has to be paid back. The purpose of the program is to teach people how to save and invest their money rather than borrow and spend.

  • Additional Asset Building Resources

    Federal Reserve Credit Card Calculatorhttp://www.federalreserve.gov/creditcardcalculator/Default.aspx

    NDSU Extension Serviceshttp://www.extension.org/personal+finance

    ND Tuition Rateshttp://mystudentloanonline.com/collegestudents_estcampus_nd.jsp

    Personal Finance Calculatorshttp://www.practicalmoneyskills.com/calculators/

  • Who do I call with questions?

    Andrea OlsonAsset Development Program CoordinatorND Community Action [email protected]

    **Mission is to help low-income families and individuals gain economic self-sufficiency through provision of programs, services, and community building**IDAs, budgeting, self-reliance, HIV prevention, homeless shelter, commodities, VITA **************CAAs have many characteristics that facilitate successful IDA programming****************Village First-time Homebuyers course, Fannie Mae, TRIO Educational Opportunity Centers, SBA and Small Business Development Centers**IDA is closed but participant is welcome to continue case management as they adjust to changes**Sponsors: Senators Mac Schneider(D)- Grand Forks, Robert Erbele (R) - Lehr, and David Houge (R)-Minot and Representatives Vonnie Pietsch (R)-Casselton and Robert Tork Kilichowski (D)-Minto. ****************************