Individual Development Account (IDA) are one of the tools that encourage people to save. These accounts are managed by community organizations in every state in the US. and usually offer a monetary “match” to those that save a specific amount of money. For example, if you open an IDA with the promise to save $1,000 to open a business the community organization will promise to contribute an extra $3,000 giving you a total of $4,000 to open your business.
Community organizations claim that IDAs are great ways to help low income families save, but I’m not so sure. The motivation behind the IDAs is that low income families will be able to save money quickly and, hopefully, start making some long-term behavioral changes. My concern is that the matching is what motivates people to save. What motivates people to save when there is no matching? Everyone working in financial education understands that giving people more money isn’t the answer to ending poverty. Unless people decide to make different decisions they will be just as broke as they were before they received the money.
Bigger Than Your Block 