Family asset building as a high impact economic development strategy
Family asset building is steadily emerging as an economic development strategy with the potential to strengthen Gateway Cities. The approach is focused on supporting individuals and helping them gain assets that provide long-term economic stability. As noted in a recent evaluation conducted by the UMass-Boston McCormack School, the benefits of this approach can translate into real gains for local economies.
Matched savings account programs, often called Individual Development Accounts (IDAs), are a central component of an asset building strategy. These programs help residents manage their finances to save money and place these savings in assets, including first homes, small businesses, education, and other investments that will lead to growth in income and increased financial stability. IDAs are provided by nonprofit organizations with support from philanthropy, state and federal agencies, and private sponsors.
In Massachusetts, The Midas Collaborative, a statewide non-profit organization, hosts matched savings accounts in partnership with community-based organizations. The community providers train and counsel participants. Midas offers technical assistance, match funding, and back-office services.
To date, the state’s IDA programs have served 474 participants. Together, they have saved a total of $374,381 and accrued $738,400 in matching funds. Participants entered the program averaging less than $22,000 in income annually, yet, on average, they managed to save 10 percent of their total monthly earnings.So far, about a quarter of the participants have completed the program. Forty-one have bought homes, totaling to more than $10 million in property value. Thirty-one graduates have invested in education, purchasing $2.7 million in educational assets. And 19 have started small businesses, amounting to more than $50,000 in equity.
Data presented in the evaluation show the impact of combining matched savings with financial education and counseling. The percentage of participants with credit card debt fell from 77 percent pre-involvement to 46 percent post-completion. Similarly, the percent “living on a budget” rose from 64 percent to 87 percent, and the percent “setting financial goals” grew from 72 percent to 96 percent.