Assets Beyond Saving in Individual Development Accounts

This study examines whether participation in Individual Development Accounts (IDAs) leads to a significant growth in assets beyond saving in the IDA accounts. Using a longitudinal experimental research design for low-income IDA participants, we test for impacts on five measures of assets: liquid assets, other financial assets, total financial assets, real assets, and total assets. Results show that, while there are no large differences in liquid and financial assets between the treatment group and the control group, IDA participants in the take-up group have more real assets and total assets than members of the control group. Results suggest that additional research to examine long-term effects of IDAs on asset growth may be fruitful. The most striking feature of U.S. wealth distribution is the degree to which wealth is concentrated in the top 5 percent of the population. Current estimates indicate that the richest 1 percent of U.S. households owns nearly one-third of the total wealth (measured as net worth) in the economy, and those in the top 5 percent hold more than half of the total wealth. At the other extreme, at least 15 percent of households have zero or negative net worth or no assets at all (Caner and Wolff 2004). Over the last decade, increasing attention has been paid to asset building or asset ownership in response to the mounting evidence showing both short-and long-term positive effects of holding assets. In addition to obvious effects such as being able to meet future consumption needs, these asset effects may include a capacity for buffering economic crises, breaking the cycle of intergenerational poverty, and building capacity of family and community in the long term (Boshara 2001; Sherraden 1991). However, low-income households not only lack assets but also lack access to institutional mechanisms that promote asset accumulation. Furthermore, existing asset-based policies are regressive in that they benefit primarily those who already hold considerable assets (Sherraden 1991, 2005a). Thus, given that existing asset-building policies, such as tax benefits for 401(k)s, tend to exclude low-income households, inclusive asset-based policies could be developed and specifically targeted toward low-income households. These inclusive policy initiatives would be defined by their expansion of access for low-income households to institutionalized structures that support asset Acknowledgments.