Funding Futures: Federal grant fuels $1M savings effort for low-income families

BOSTON – United Way of Massachusetts Bay (UWMB), in partnership with MIDAS , is today unveiling a new $1 million public-private partnership that will bring a powerful savings tool to Boston-area low-income families. “Funding Futures” will provide 500 low-income families with an incentive to save, helping them to meet their financial goals and achieve self-sufficiency.The new partnership is being announced as a Massachusetts legislative conference committee considers a provision that could make Individual Development Accounts (IDA) more accessible to low-income families.

An IDA is designed to help working-poor individuals and families build financial assets by pooling federal, state and private funds to match earned income deposited into a savings account. IDAs are offered only through nonprofit and government organizations and can only be used by qualified participants to purchase their first home, pay for post-secondary education or start a business.

The $1 million effort is an example of how leveraging funds can have greater impact in the community. The U.S. Department of Health and Human Services has awarded United Way of Massachusetts Bay $500,000 to fund the project. UWMB will match this federal grant with $400,000 raised from private donations and an additional $100,000 contributed by the Massachusetts Department of Transitional Assistance (DTA).

“Far too many low-income families and individuals do not have the means to start savings accounts or build the skills that will enable them to get out of poverty and get started on the path to economic independence,” said Milton J. Little, Jr., president and chief executive officer at UWMB. “We’re proud to announce that our region will receive new federal funds to help a significant number of families save their way toward buying a home, attaining an education or starting a business.”

“Our $1 million partnership, as well as recent signs of legislative support, recognize the value of helping people to build financial skills, invest in assets, and take charge of their economic futures,” said Margaret Miley, MIDAS Coordinator.

UWMB has partnered with MIDAS, a statewide collaborative that administers and promotes asset building initiatives and DTA, which oversees the state’s welfare population, to launch Funding Futures. The partnership will help 500 Boston-area low-income families enter into MIDAS-managed IDA programs that will enable them to open IDA accounts, learn sound financial literacy skills, and, at the completion of the program, purchase a home, pay for post-secondary education or start a business.

More specifically:

• 40 participants will purchase homes with an emphasis on housing in Lynn and Salem ;
• 400 participants will go back to school and gain the skills and knowledge to enhance their career options and income; and
• 60 participants will capitalize a business opportunity or expand a current venture.

UWMB and its partners provide the matching funds for IDA accounts through a bank or financial institution on behalf of its participants. Deposited earned income is matched on a pre-determined basis; usually $2 for every $1 saved with a set limit on the size of the match.

In addition to providing low-income individuals and families with an incentive to save, IDAs help people develop the skills and knowledge needed to succeed. To help meet their specific goals, participants are required to receive financial education and other types of relevant training, such as homebuyer education, credit counseling or principles of entrepreneurship.

“The IDA program not only made it possible for me to save for a down payment, it gave me the financial and home buying skills I needed to make home ownership a reality for me and my son,” said Mary Guillermo, an IDA participant at Allston Brighton Community Development Corporation, a United Way partner agency. “I also got training to improve my computer skills, and that helped me get a promotion at work.”

The recent economic stimulus package passed by the Massachusetts House and Senate boosts IDAs as a strategy to make economic independence and self-sufficiency more accessible to low-income families and individuals. Legislation passed by both branches includes a provision establishing the Massachusetts Asset Development Commission. This commission will be charged with examining the success of low-income workers in saving money and building assets, identifying strategies that offer real promise and making recommendations for state policies that include collaboration with businesses and community organizations. This provision requires final approval by the Legislature and the Governor before it becomes law.