How to Open an Individual Development Account

An Individual Development Account (IDA) is a savings account that low income people can start where the government will match their savings with government contributions. The matching fund ratios for IDAs range from a 1:1 ratio up to an 8:1 ratio up to a maximum amount of matching funds of about $4,000. IDA programs have three funding goals. IDAs opened by refugees are a special category that allows matching funds for the purchase of a car. The other three programs are for first-time homebuyers, venture capital to start a business, and tuition for college. A plan will be prepared to reach your goal. Participants must save a certain amount each month for an extended period in order for the IDA to fund your specific savings goal. The IDA program is also referred to as the Assets for Independence (AFI) program.

Things You'll Need

• Savings plan
• Business plan, if appropriate
• Credit to buy first home, if appropriate
• College attendance and tuition, if appropriate
• Credit to buy a car, if you are a refugee

Instructions

Open an individual development account

1. Determine what you intend to do. Individual Development Accounts (IDA) can be used to start a business, for a first-time homebuyer or to pay for college tuition and fees. Additionally, if you are a refugee in need of a car, an IDA may assist you in saving to by one.

2. Locate your nearest IDA administering agency.

3. Contact the IDA administrator and ask what types of IDAs they fund (i.e., business, college, homes or cars). In regard to new businesses, you will need to prepare a formal business plan. In relation to college, you will need to provide proof of college registration and attendance. Applicants for first-time home purchase will need to have adequate credit to finance the purchase of a home. In the case of refugees saving for an automobile, you may also need to have adequate credit, if the car purchase is being financed.

4. Ask what ratio of matching funds the IDA administrating agency provides.

5. Arrange for an appointment to meet with the IDA administrator and to complete an application for funding.

6. Prepare a budget to be presented to the IDA administrator. If you are starting a business, you will probably be required to prepare a business plan and have it approved by the administrator.

7. Pay your agreed-upon savings amount into your IDA account on a monthly basis. You must contribute each month for an extended period of time. Hopefully, you will then achieve your goal and be funded by the IDA administrator with the matching funds you worked so hard to get.

Tips & Warnings

• You will be required to account to the IDA administrator for any funds that you receive.

Resources

• This site contains a searchable directory of existing IDA administrative agencies.