Individual Development Account (IDA): What it is, How it Works

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Updated September 04, 2022
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What Is an Individual Development Account (IDA)?

An individual development account (IDA) is a type of savings account designed to help low-income individuals build assets and achieve financial stability and long-term self-sufficiency. People use IDAs to save money to start a business, pay for education, or buy a home.

Key Takeaways

  • An individual development account (IDA) is designed to help low-income individuals build assets and achieve financial stability and long-term self-sufficiency.
  • People use IDAs to save money to start a business, pay for education, or buy a home
  • To qualify for an IDA, an individual may have to complete free financial literacy training, which teaches subjects like money management, debt reduction, and investing.

Understanding Individual Development Accounts (IDAs)

IDAs help people build financial stability in several ways. To qualify for an IDA, an individual may have to complete free financial literacy training, which teaches subjects like money management, debt reduction, and investing.

An IDA will also help make savings go farther: As in a 401(k), the money a person saves in an IDA is then matched (in this case by private or public funds), increasing the total account value. Participants open an account with an approved financial institution and make recurring deposits over a set period of time. The funds are then matched, often at a 2:1 or 1:1 ratio (the exact amount matched varies depending on the state and program).

To qualify for an individual development account, participants must meet specific criteria related to income, assets, and employment.

Program eligibility criteria vary by program, but most require that your income be less than two times the federal poverty level, that you have income from a job, and that you attend financial literacy programs. Other criteria might include meeting certain asset limits, your citizenship or legal resident status, and having credit.

History of Individual Development Accounts (IDAs)

IDAs started in the 1990s as a way to reduce poverty. In the late 1990s, IDAs started to receive federal funding from the Assets for Independence Act (AFIA) and the Temporary Assistance for Needy Families (TANF) program. There are hundreds of IDA programs across the country.

However, the Assets for Independence (AFI) program behind many IDAs was defunded starting in 2017. Since then, individual states have been working to fill in the gaps in funding.

Special Considerations

Having an IDA won't harm your supplemental security income (SSI) benefit, if you receive one. That's because the money you deposit, the matching funds, and any interest you earn don't count as earned income.

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  1. Social Security Administration. "Spotlight on Individual Development Accounts 2021 Edition."

  2. Disability Benefits 101. "Individual Development Accounts: Eligibility."

  3. United Way of Central Alabama. "Individual Development Account."

  4. HUD User. "Individual Development Accounts: A Vehicle for Low Income Asset Building and Homeownership."

  5. Prosperity Now. "Connect with Programs."

  6. Office of the Administration for Children and Families-U.S. Department of Health & Human Services. "AFI DCL Fiscal Year 2017 Assets for Independence Program Funding."

  7. Prosperity Now. "What's Next for Matched and Incentivized Savings: Where We Are Now."

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