Individual Development Accounts (IDAs)

If you save money in an Individual Development Account (IDA), the IDA program’s sponsor or financial institution will match the money you save. The match may be anywhere from one to four times the amount you deposit. For example, if your IDA program has a 2:1 match and you deposit $50 into your account, the program will add an additional $100 towards your savings goal, so that your total savings for that month will be $150!

To open an IDA:

  • Your annual income must be 200% of the Federal Poverty Guidelines (FPG) or less ($24,980 per year for individuals)
  • You must have earned income from a job or your own business
  • You have to take financial literacy classes about things like money, debt reduction, developing a savings plan, credit, and investing; and
  • Depending on the program, you may also need to be a U.S. citizen or permanent resident.

You also have to use the IDA to save money for an approved goal. IDA programs usually allow one of the following goals:

  • Buying a first home
  • Paying for education or training costs, or
  • Funding a small business.

Most IDA programs only let you save a limited amount of money in your account, usually $4,000 to $6,000. This includes the money you deposit plus the matching funds. Once you reach the limit, you won’t be allowed to deposit any more money into the account. IDA programs also limit how long you can save (usually three years).

Important information about IDAs if you get public benefits

IDAs can be funded by government agencies, private companies, nonprofits, and individuals. Depending on how your IDA program is funded, the money you save may count against the resource limits for programs like Supplemental Security Income (SSI) and WorkFirst New Jersey.

If you get benefits from a public program, it is very important to find a federally-funded IDA program that will not count against the program's resource limit. Otherwise, you may lose your benefits. Before you open an IDA, talk to a Benefits Planner about this issue.

When you enroll in an IDA program, ask your IDA caseworker to write a letter saying that you can be in the IDA program without losing your SSI benefits. The letter should mention the “Exclusions Under Other Federal Statutes” clause. If you get SSI, take that letter to Social Security, give a copy to your local county Board of Social Services, and keep a copy for yourself.

Finding and Applying for an IDA

Once you’ve decided to do an IDA, you must take several steps to enroll in an IDA program:

  1. Decide how much money you plan to save and what you are going to do with it. You could use the money for something that will help you with your education, with your small business, or with buying a home.
  2. Find an IDA program in your area. There are IDA program directories at the New Jersey Individual Development Account Program, Prosperity Now, and the Assets for Independence Resource Center (AFI).
  3. Find out as much as you can about the IDA program you are considering.
    • How is the program funded? Is it federally funded?
      • If the IDA program is federally funded, money deposited and matched in that account will not be counted by SSI or Medicaid. That means it will not impact your benefits.
      • If you enroll in an IDA that is not funded by the federal government (for example, an IDA funded by a nonprofit or private company), the money in your IDA may cause you to lose your SSI and Medicaid benefits.
    • Does the program fund your goal?
      • Federally funded programs only let you save for small businesses, higher education, and the purchase of a first home.
      • Some privately funded IDAs may let you save for other goals, like buying a new computer or car.
  4. Go to an orientation meeting to learn more about an IDA program that interests you.
  5. If you decide to enroll, give the required personal and financial information to make sure you qualify for the program.

After you have been accepted into an IDA program, you will be given an IDA caseworker who will help you with your account. You’ll open a savings account with a bank or credit union that is tied to your IDA program. Depending on the program, you may need to deposit a certain amount of money into your account each month.

I've saved my goal amount and am ready to spend my money! Now what?

For some IDAs, there is a minimum amount of time that you must be enrolled before the matching funds start to add up. For example, the minimum could be six months for a business or educational goal. Once you have met the minimum requirements — you’ve saved the agreed on amount every month for six months and you’ve taken the financial literacy workshops — you can spend your money.

Some IDAs will put money directly in your savings account for you to spend. Other IDAs don’t put money in your savings account. Instead, they calculate how much they owe you in matching funds and make a payment to the school, business, bank, or whomever you need to pay to achieve your goal. This is to avoid any illegal or fraudulent behavior.

In any case, the matching money cannot be used until you have met all requirements, are in good standing, and are ready to spend it.