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Breaking the cycle of poverty; Special matching savings accounts, paired with money-management classes, help low-income candidates get a true foothold financially

Kathy Kristof
The Chicago Tribune
Aug 29, 2010

Dametria Williams started her financial life as a statistic: a poor single mom, just like her mother and grandmother before her.

But the San Francisco health care worker decided to break the cycle of poverty. Now, the 38-year-old is a college graduate on the cusp of opening her own business. She is also raising a high-achieving teenager who is in a position to win merit-based college scholarships.

She attributes her life's 180-degree turn to two things: a new attitude and a savings account with matching funds provided to low-income participants.

"I used to walk through the world thinking there is never enough," she said. "There is not enough money, there is not enough food, there is not enough time.

"When you are in the mindset of thinking there is not enough, you aren't even looking for help. But when you realize that there is enough, that money is a manageable tool, you start to see what help is available to you."

The key for Williams was an Individual Development Account, which funded tutoring for her daughter and is now helping Williams save for her business.

Unfortunately, IDAs like the one Williams discovered may be among the best-kept secrets in finance. These amazing accounts, offered in every state, help low-income workers set aside money for education, a first home or starting a business.

But they're frequently overlooked because the programs are neither standardized nor offered on a national basis. Instead, they are provided through a patchwork of local groups and charities, each of which may have different rules on who can qualify for help and what kind of help they can receive.

What they all have in common is a belief that anyone can break the cycle of poverty, regardless of how little they earn, through savings.

But it's tough to save when you're not good at money management and have little inspiration because your savings seem to grow so slowly. The solution: linking money-management classes with the ability to earn a matching amount of savings that can boost the money in your account by as much as $3 for every $1 you set aside. Every program handles the matching differently.

That's exactly what Williams got when she opened accounts with San Francisco-based nonprofit Earned Assets Resource Network, better known as EARN.

She saved $500; EARN matched her threefold with $1,500. The combination was enough to pay for eight months of tutoring, which was the leg up her daughter needed to put her on a scholarship track.

"We talk a lot about the numbers," said Ben Mangan, president and chief executive of EARN. "But the most important thing that we see is the profound effect this has on individual people's lives and their behavior."

Overcoming obstacles

There are two problems with getting low-income workers to save, experts note.

The first is that they simply feel that they can't afford it. The second is that, because they don't have savings, relatively small upsets -- a car repair or an illness that keeps them from work for even a few days -- can push them into high-cost borrowing and unravel their financial lives.

Williams, for example, was earning about $14,000 annually and felt there was no way she could save because she was spending every dollar on basics: rent, food, car payments and tolls to get across the bridge into San Francisco.

"A week after I got my paycheck, I needed to borrow money," Williams said.

But during the mandatory counseling with the EARN program, Williams discovered an array of government and social assistance programs that could help defray some of her expenses, including her rent. She also got coaching on how to set aside money in advance for regular expenses, like the $50 she spent each month on tolls.

She said she's now using her money so effectively that she's able to donate a small amount each month to her daughter's school in addition to saving for her business.

Her goal: save another $2,000, which the EARN program will match with $4,000. That should help create some economic cushion for Williams to identify potential customers for the business she plans to launch, which will connect elderly and disabled people with the health services they need.

"It's a work in progress," she said. "I'm waiting for licensing and Department of Justice clearances ... and I'd like to have a few clients signed up."

Williams' message: If she can do it, so can you.

"I've learned to live off about 70 percent of what I earn, rather than 100 percent," she said. "No matter what you have, it's manageable if you utilize your resources properly." - - - Find a matching program

How can you find an Individual Development Account program? The Corporation for Enterprise Development in Washington, D.C., maintains a list of IDA programs offered in every state at, but each program has different criteria and makes different promises. Some match savings on a dollar-for-dollar basis; others provide more generous matching grants, depending on your savings goal.

You have to call each program to find out if you qualify. Eligibility standards typically are based on where you live and how much you earn. Some also provide money only to those saving for a specific goal, such as home ownership, while others will provide matching grants for education and business startups.

Eligibility guidelines

There are hundreds of IDA programs in the U.S., and most base eligibility on the following:

Income: Maximum annual income levels for many IDAs are 200 percent of the federal poverty level, which is $21,660 for a single person, $29,140 for a family of two, $36,620 for a family of three and $44,100 for a family of four. For larger families, see

Earnings: Many programs require that all or part of savings come from income earned through employment.

Net worth: Many cap at $5,000.

Credit: Substantial debt or a bad credit history works against you.


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