Individual Development Accounts for Foster Youth
By Qiana Torres Flores and Aubrey Hasvold | Vol . 22, No. 09 / March 2014
Did you know?
- Nearly 26,000 young people in foster care between the ages of 18 and 21 lose most or all public support every year.
- Individual development accounts—matched savings accounts—for foster youth aim to help participants transition out of care and into adulthood.
- Foster youth with IDAs commonly save for a vehicle, housing and education costs.
Nearly 26,000 young people “age out” of the foster care system annually, which means that between the ages of 18 and 21 they lose most or all public support. Suddenly absent of financial and social supports, foster children are vulnerable to unemployment and homelessness and often lack the resources to attain higher education, which can lead to reliance on public assistance. Individual development account (IDA) programs are one tool designed to help current and former foster youth successfully move forward in life.
Traditionally, IDAs are matched savings accounts that may be invested in housing, pursuing an education or developing a small business. These accounts are intended to encourage low-income people to save by matching their monthly deposits. IDAs for foster youth aim to assist participants with the transition out of care and into adulthood and financial independence. In addition to the traditional asset goals, IDA programs for foster youth often allow participants to save for their unique needs, which could include job training, technology for work or school, a vehicle, health insurance premiums or a housing deposit. Many IDA programs serve individuals ages 13 to 26 and offer a match for every dollar saved, ranging between a 1:1 and 4:1 ratio. Accountholders are usually required to participate in financial education, credit and debt counseling, or business development training to instill long-term positive money management skills. Program funding is provided by public and private sources
Washington is the only state to date to pass legislation establishing a pilot program to provide IDAs to foster youth. The program was implemented in 2005, but then eliminated in 2010 due to budget shortfalls. Participants could receive a 2:1 match and get up to $4,000 over a four-year period. Of 66 purchases made by participants in the statewide IDA program in 2008, six were made by foster youth through the pilot program. The Department of Community, Trade and Economic Development administered the program in partnership with local community-based programs; it was funded by state and federal dollars. New York and Texas introduced bills to create IDA programs for foster youth in 2013. Indiana enacted a bill requiring caseworkers to inform foster parents and children about IDA programs in 2010.
Communities in at least 13 states have adopted the Opportunity Passport, an IDA program for foster youth developed by the Jim Casey Youth Opportunity Initiative, an organization that helps young people transition from foster care to adulthood. The program offers IDAs with a 1:1 match for up to $1,000 per year for foster youth ages 14 to 24 to save for education, a vehicle, housing, investments, microenterprise and health care. Nearly 5,000 foster youth have participated in the Opportunity Passport program since its inception in 2001. The initiative conducted a five-year study of the Opportunity Passport, finding that:
- Thirty-five percent of participants withdrew matched savings.
- The most common purchases were for a vehicle (41 percent), housing (24 percent) and education (21 percent).
- After making their first purchase, almost half of participants stayed in the program to save for another purchase.
- Those with additional challenges—such as being parents, having no permanent adult connection or being homeless—actually saved and matched at a higher rate than others.
The initiative found that 30 percent to 40 percent of those who enroll meet their savings goal and receive a match averaging between $700 and $800. The Opportunity Passport savings and match rates are similar to the results from an evaluation of the American Dream Demonstration, an adult IDA program..
The Bridging the Gap program in Denver was established by the Mile High United Way in partnership with the Young American’s Bank in 2005. Individuals’ savings are matched 1:1 up to $500 per year for two years. Accountholders can also receive incentive payments for good grades, securing employment or opening other savings accounts. Between 2002 and 2013, 628 foster youth opened IDA accounts, for a total of 1,213 disbursements. Almost 60 percent of participants who closed their account made at least one asset purchase; of those, 261 used their savings for housing, 249 to purchase a vehicle and 209 for education expenses. The program is funded by state, federal and private funds.
The primary federal funding source for IDAs for foster youth is the Chafee Foster Care Independence Program (CFCIP), which allows programs to match savings for some of the unique needs foster youth have, such as a vehicle or housing deposit. Other common sources of federal funding for IDAs are Temporary Assistance for Needy Families grants and the Assets for Independence Act funds, which allow matches for a home, education and small businesses costs.