Economic Security: Key to Recovery and Self-Determination
Full Story
| Commentary Archive
| Topics: consumers, recovery
by Judith A. Cook, Ph.D., Jane K. Burke-Miller, Ph.D., and Tina M. Carter, B.A.
Economic security to people in recovery is critical to avoid a phenomenon referred to as the Poverty Trap. Ironically, when people return to work and begin building careers, they often endanger critical public benefits and entitlements and research shows that people risk cash income, health care coverage, housing, and other critical resources during the recovery process. Since services seldom include assistance with enhancing financial self-sufficiency, many people have no economic safety net and therefore lack pathways to financial security.
To address these needs, a recent meeting of the Center for Mental Health Services National Advisory Council Subcommittee on Consumer/Survivor Issues dealt with the importance of economic security to people in recovery. This is also an important area of focus for our Center at the University of Illinois at Chicago where we teamed up with people in recovery, a psychiatric rehabilitation program, a community development corporation, and banking institutions to help consumers/survivors in Chicago accumulate financial assets.
Our project helps people establish special savings accounts called Individual Development Accounts (IDAs) that are designed to promote economic self-sufficiency. IDAs are geared to the needs of low-income individuals who are working and able to save modest amounts of money. Until now, few IDA programs have been targeted to individuals with disabilities, and this project is one of the first designed for people with psychiatric disabilities.
IDAs are unique. Under the federal IDA program, an individual's savings is matched first by a non-federal source (such as a bank or philanthropic foundation), and second by the federal government using a specific matching formula. The amount of federal funds that may be allocated to an individual's account is $2000 per IDA, while there is no limit on the local match. An individual's contributions to an IDA must come from earned income and must be used to help finance the purchase of a first home, small business capitalization, or post-secondary education. Participants also receive financial education and counseling.
Because savings accumulated in an IDA are not counted as assets when assessing SSI or SSDI eligibility or cash benefits under the federal program, a disincentive to asset accumulation has been removed. As of 2003, 34 states, Washington, D.C., and Puerto Rico had passed IDA legislation, with over 500 IDA initiatives and 10,000 IDA savers nationwide.
Grants to our National Research and Training Center on Psychiatric Disability have funded our local IDA project. This project is being implemented at Thresholds, a psychiatric rehabilitation center in Chicago serving 5,000 adults through its comprehensive program of supported education, supported employment, housing, and wellness services. The Goodcity Asset Builders Community Development Corporation is coordinating access to the banking institution and the federal match for this project. Susan Buffett Foundation is providing the local match.
Thus far, five employed members of Thresholds have received financial education and counseling, assistance with establishing an IDA, and ongoing support. Our Center adapted a Financial Education Curriculum from one developed by the University of Illinois Extension Program, and tailored it specifically to the needs of people with psychiatric disabilities. This highly personalized, interactive course engaged participants in tracking their expenses, creating budgets, and designing their savings plans. Classes also covered financial management, spending habits and values, understanding credit, and building savvy consumer skills. Participants received assistance with completing their IDA applications and supporting paperwork. Their eligibility was then verified by project partner Asset Builders CDC (an IDA program administrator in Chicago), and information was collected to meet federal reporting requirements. Finally, the group met with a representative from Charter One Bank who took their initial IDA deposits ($25 each) and opened five IDA savings accounts.
Since the initial deposit, the group has met on a regular basis to monitor deposits, learn more about how to achieve their particular savings goals, and make detailed plans to reach their goals. Several participants found that they could increase their monthly deposits comfortably, and one has also paid off a credit card debt while saving $100 a month! The group frequently revisits aspects of the financial education curriculum, especially those to do with spending less, maintaining good credit, and maximizing tax benefits such as the Earned Income Tax Credit.
As of June 2008, IDA holders have saved between $250 and $1,200 of their own money. By the end of the savings period in August 2009, we expect participants will have saved between $400 and $2,000 per person. With federal and private matching funds, this will result in savings of at least $1,200 to $6,000 per person, to put toward IDA goals.
Putting IDAs to work
The two participants with the highest savings amounts are planning to translate their estimated $6,000 IDA funds into housing. In combination with city and state first time home buyer programs, these amounts will go to covering down payment and closing costs on condominiums. Planning for this goal involves ensuring that mortgage and other ongoing housing costs will be affordable, and that participants have credit histories good enough to obtain low interest loans.
A key aspect of planning for post-secondary education goals is exploring different school programs and costs. For example, one participant who just completed an associate degree is working with project staff to identify local four-year colleges that will accept the most transfer credits. Another participant interested in adding a doctorate to her master's degree is being helped to locate local university faculty who can discuss the merits of different graduate programs in her field of interest. Depending on their choice of schools, these participants' roughly $2,400 savings will cover up to a year of tuition and related costs. Therefore, additional planning involves researching other sources of tuition funding to ensure that they can reach their academic goals.
The final participant will have approximately $1,100 IDA to fund the start-up of a small business enterprise. These funds will go toward the purchase of computer and telecommunications equipment as well as other supplies. With help from the project, this participant found and completed a non-credit course in self-employment and business management and will partner with a mentor from the SCORE® program to develop a business plan.
All told, the program will generate over $17,000 in savings. We hope that these assets will, in turn, generate even more financial security through housing equity, higher paid jobs, and successful micro-enterprise operation. Over the coming months, the group will be visited by specialists in low-income home purchasing, financing post-secondary education, and micro-enterprise development. A project evaluation is tracking participants' asset accumulation and the project's impact on financial self-sufficiency, along with the sustainability of the program after federal funding has ended.
There are more than 200 agencies and community-based groups across the nation that run IDA programs to help low-income families build their economic assets. Visit http://www.acf.hhs.gov/programs/ocs/afi/index.html and click on "Grantees" to locate a project in your area. In addition, to learn more about the Center's IDA project and how to obtain a copy of the Financial Education Curriculum, click here.
Judith A. Cook is the Director of the University of Illinois at Chicago National Research and Training Center on Psychiatric Disability.
Jane K. Burke-Miller is a Research Specialist at the University of Illinois at Chicago National Research and Training Center on Psychiatric Disability.
Tina M. Carter is Dissemination Coordinator at the University of Illinois at Chicago National Research and Training Center on Psychiatric Disability.
This project is funded by the Center for Mental Health Services' Community Support Programs Branch and Consumer Affairs Program, Substance Abuse and Mental Health Services Administration, and the National Institute on Disability and Rehabilitation Research, U.S. Department of Education (Cooperative Agreement No. H133B050003). The contents of this article do not necessarily represent the policy or views of any federal agency.
