Press Releases and Media Advisories

Program Aims to Help Low-Wage Working Families Build Assets

September 3, 2008, Salt Lake City, UT -- If someone supporting a family of four on about $35,000 a year can manage to save a big chunk of income, what's stopping the rest of us from saving more?

The demand for Individual Development Accounts (IDAs) continues to grow and savers are successfully purchasing homes in this troubled economy, furthering their skills through education and starting or capitalizing existing small businesses.

The average savings rate across all American households is stuck in negative territory - but low-income individuals and families participating in the Utah Individual Development Account Network (UIDAN) are saving 5% of their hard-earned money and investing their savings in homeownership, education, and small business.

For every dollar an UIDAN participant saves up to $1,500, UIDAN pays $3. That means those who complete the program can walk away with as much as $6,000 towards a productive asset. 55% or the program participants are saving to buy a home, 32% are saving for education, and 13% are saving to start or capitalize a small business.

Mindy and her daughter did just that. Mindy saved $62.50 per month for 24 months and in addition to completing financial management classes and maintaining a personal budget, she attended HUD approved home ownership training. Mindy worked with the Salt Lake County Housing Authority to get off Section 8 housing assistance and learned about two other programs that help her reduce her monthly mortgage payment. She leveraged her money with a Home Start loan and Taylorsville down payment assistance to put an additional $15,000 towards the purchase of a home.

To get the match from UIDAN, savers must complete a series of personal financial-management classes, and the money must go to a specific goal such as buying a house, paying for college or starting or capitalizing an existing a small business. AAA Fair Credit Foundation, the nonprofit organization who administers the program, uses IDAs, as an asset-building tool first outlined in "Assets and the Poor," a book by Michael Sherraden, founder of the Center for Social Development at Washington University in St. Louis.

"When low-wage workers gain the skills and tools to save and invest in assets like homes, microenterprises, and college degrees, they gain the power to help their families break the cycle of poverty forever," explains Preston Cochrane, AAA Fair Credit Foundation's President and CEO. Savers who participate often continue their financial goal-setting long after they've invested in their initial asset. Overwhelming percentages of IDA participants say they're more confident about the future, they take more initiative," Cochrane said.

Payam is married with 2 children. He came to this country as a refugee. He attended Horizonte School and received his GED. He worked full time for the Asian Association of Utah and has served as a medical translator. He is using his vocational education IDA account to study Aviation Technology at Salt Lake Community College.

UIDAN raises funds to support the operations and match dollars. "With the generosity of community members, corporations, and foundations, we can continue to expand our work and provide even more matched savings accounts to eligible Utah residents. Whether you want to sponsor specific accounts, specific goals, or just add to the pool of match money, we need to raise these important funds to ensure we can help all of our participants succeed in their goals and to make the program work," Cochrane said. Each dollar donated will leverage an equal or greater amount of federal or government grant funds to match the savings of low-income individuals participating in UIDAN's matched savings program.

How do these low-wage workers do it? It doesn't take rocket science. It does take tenacity. For Katie and her husband saving money required sharply curtailing any unnecessary expenditures. "We heard about the UIDAN program through a friend at college. I thought it sounded like a great idea since both my husband and I were enrolled in college and felt like we would never be able to save enough money to purchase a home. We attended the financial classes, found out more about the program, and decided that it was for us. We started saving in April 2007. Since then I have graduated college and started an entry level career and my husband is working part-time and is on track to graduate spring 2009. It can be difficult at times to find the extra money to save each month with our limited salaries; but when we think about the end goal, it is a lot easier. I know that if we were not part of the UIDAN program, there would be no way that we could be ready to purchase a home a year from now. This program has truly provided us a way to learn how to save and plan for the future," explains Katie.

The money-management classes, including lessons on how to budget and how to attain specific assets, are another central part of the program. For each hour of basic financial education or asset-specific financial education -- homeownership, entrepreneurship -- monthly savings increased by $1 to $2. That may not sound like much, but it adds up when multiplied by many hours of instruction and years of saving.

UIDAN's first IDA account was opened in October 2004. "Over 256 low income people have participated in the program since that first account opened. Ninety-nine percent are saving as contracted and over 60 people have already purchased a productive asset," said Martha Wunderli, UIDAN's State Director. "UIDAN gives savers competence, capital, connection and confidence to purchase their first home. Many of UIDAN's savers have monthly mortgage rates with taxes that are less than fair market rental rates. UIDAN savers have generated over $3.5 million in mortgages since the program opened," according to Wunderli. In February, CFED talked with some community groups nationwide and found that just one of 600 homeowners who bought homes with the help of an IDA account in the last five years had entered foreclosure.

UIDAN partners with Centennial Bank, Far West Bank, US Bank, Washington Mutual and Zions Bank who hold the individual IDA savings accounts. UIDAN educates its participants against riskier interest-only and adjustable-rate loans and strongly suggests savers take only the standard 30-year fixed-rate mortgage.

For more information about the Utah Individual Development Account Network, please visit http://www.uidan.org or call 877-787-0727 (English) or 800-341-5977 (Spanish).

Press Contact:
Jennifer Rohn
Public Relations Manager
800-351-4195 ext. 301
jenniferr@faircredit.org