Absence of conflict of interest.
Citation
Highlights
- The study’s objective was to examine the impact of participation in an Individual Development Accounts (IDA) program on savings for individuals living in poverty.
- The study used a matched comparison group design to compare the difference in savings between individuals who completed financial education requirements to those who did not complete financial education requirements. The authors used administrative records from financial institutions and self-reported data from participants to conduct statistical analyses to compare differences in outcomes between the groups.
- The study found that participants who completed financial education requirements were significantly more likely to have a higher average of monthly savings, save a higher portion of their income, and a higher frequency of making deposits into their savings compared to participants who did not complete financial education requirements.
- This study receives a moderate causal evidence rating. This means we are somewhat confident that the estimated effects are attributable to Individualized Development Account programs, but other factors might have also contributed.
Intervention Examined
Individual Development Accounts
Features of the Intervention
An Individual Development Account (IDA) is a subsidized savings account program that aims to reduce structural financial barriers for low-income adults. IDAs were implemented through a program called the American Dream Policy Demonstration. The American Dream Policy Demonstration targeted adults who were at or below 200% of the poverty line. Fourteen community organizations across the United States implemented the IDA program model through the American Dream Policy Demonstration from 1997 through 2001. Six of the sites were community development organizations, while the remaining eight were social service agencies, banks, credit unions, housing development organizations, and community-based collaboratives. The sites encouraged individuals to participate in free financial education sessions on budgeting, money management, and strategies to create and retain savings, as well as training on the purchase and management of assets such as mortgages. Participants were also encouraged to make deposits into their savings account to buy homes, purchase home repairs, attain post-secondary education, save for retirement, and other approved assets. The sites matched the savings deposits for the approved assets.
Features of the Study
The study used a matched comparison group design to examine how financial education dosage affected individuals average monthly savings, portion of their income used for savings, and how often deposits were made into their savings accounts. The study was conducted at fourteen sites in 11 states and the District of Columbia. The study sample included 2,044 participants who participated in the American Dream Policy Demonstration. The authors calculated the dosage of financial education as the ratio of general financial education received to the required amount by the site. Participants were divided into five groups of varying financial education dosages. Four treatment groups received financial education dosages greater than or equal to 100% of the required dosage: (1) 814 participants received 100% of the required dosage; (2) 345 participants received 101-150% of the required dosage; (3) 108 participants received 151-200% of the required dosage; and (4) 89 participants received more than 200% of the required dosage. The 688 participants in the comparison group received 0-99% of the required financial education dosage. The majority of the study sample were female (79.4%), never married (49.4%), African American (45.5%), had some college education (60.4%), employed full-time (58%), and had an average age of 35.9 years old. The authors conducted statistical models to compare outcomes of participants in the treatment and comparison groups.
Study Sites
- California
- Illinois
- Indiana
- Kentucky
- Missouri
- New York
- Oklahoma
- Oregon
- Texas
- Vermont
- Wisconsin
- Washington D.C
Findings
Knowledge and skills for money management
- The study found that participants with a financial education dosage greater than or equal to 100% were significantly more likely to have a higher average net deposit than the comparison group participants.
- The study also found that participants with a financial education dosage greater than or equal to 100% had a significantly higher frequency of monthly deposits into their savings accounts than comparison group participants.
- The study found that participants with a financial education dosage greater than or equal to 100% were more likely to save a higher portion of their income than comparison group participants. The differences were significant for all treatment group participants except for participants with a financial education dosage of 151-200%.
Causal Evidence Rating
The quality of causal evidence presented in this report is moderate because it was a well-implemented nonexperimental design that controlled for pre-existing differences between the groups. This means we are somewhat confident that the estimated effects are attributable to IDAs, but other factors might also have contributed.