Asset Development and Financial Literacy

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Thinking with

parents, family members,

advocates and people

with disabilities… About available

programs that help

improve the financial

outlook and quality of

life for individuals with

disabilities

What is Financial Literacy?

Financial Literacy is defined as:

“having the knowledge, skills and confidence to make responsible financial decisions”.

(Task Force on Financial Literacy, 2010)

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What is Asset Development?

Asset development is:

“Encouraging people to save money and to make investments that increase in value over time”.

“As individuals develop assets, they and their families will be more able to move out of poverty and remain out of poverty”.

http://www.disability.gov/community_life/independent_living/asset_development

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Financial Literacy

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Today’s main ideas

Financial Literacy or money management

Asset Development or building wealth

Several programs that can help

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Did you know that?

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Did you know?

• 59% of people with disabilities are asset poor?

Have insufficient resources to live at the poverty level for three months without another means of support.

http://factfinder.census.gov/servlet/ACSSAFFFacts?_event=Search&_state=04000US18&_lang=en&_sse=on

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Did you know that?

Nationally, 1.8 million SSI recipients with disabilitiesbetween the ages of 18 and 64 have no banking

relationship;

50.7% of SSI recipients do not currently direct Deposit their monthly checks. (SSA 2002)

http://factfinder.census.gov/servlet/ACSSAFFFacts?_event=Search&_state=04000US18&_lang=en&_sse=on

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What does having money in the bank mean to you?

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Discussion

Did you know that having money in the bank:

1. Increases your chances to stay where you live 2.Helps you think positively about your future 3.Enables you to stick to a career choice 4.Helps you get better terms from the bank 5.Provides a foundation for risk taking 6. Increases your ability to make choices7. Improves the wellbeing of children 8. Increases community connections 9. Increases political participation

(Sherraden, 2005).

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What can we do?

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What can we do?

Several programs that promote asset accumulation and money management strategies include Assets for Independence (AFI) Individual Development Account (IDAs), Plans for Self Sufficiency (PASS), HUD home ownership programs, IRWE, and Benefit management, etc.

People with disabilities who utilize Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), Temporary Assistance to Needy Families (TANF) and Medicaid can use a variety of strategies to improve their personal and economic independence.

- Breaking the Cycle of Poverty: Asset Accumulation by People with Disabilities. Disability Studies Quarterly, Vol 26, No 1 Winter” Copyright 2006 by the Society for Disability Studies

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Envelope Budgeting

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http://www.youtube.com/watch?v=mwtkD5KXihw

Is there anything we can do?

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Two approaches

Money management or Financial Literacy is:

“Having the knowledge, skills and confidence to make responsible financial decisions”.

“Money management is a matter of choices based on values and goals”.

Making your Money Work, Purdue extension Services;

Task Force on Financial Literacy, 2010

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Asset development is:

“Encouraging people to save money and to make investments that increase in value over time”.

“As individuals develop assets, they and their families will be more able to move out of poverty and remain out of poverty”.

http://www.disability.gov/community_life/independent_living/asset_development

What is an asset?

Assets are the portion of something you own that can be converted to cash. Examples are a saving account, a home, a car, or jewelry, etc.

For example, it can be the value of what that item can be sold for. Or, if you are still paying on an item such as a car or a home, it is the value of what the item can be sold for minus what you still owe on the item (or loan).

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How can we improve our own Asset Development?

Asset Development is increasing your wealth:

Building up a savings accountPaying on a homeBuying a carHaving an Individual Development Account (IDA)Having a Plan to Achieve Self Support (PASS)

(Soc. Sec)

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Why Asset Development?

Government programs continue to be cut.

Can be used to buy a place to live.

Provides ability to be more in control and lead a

fuller life.

Working in the community allows people to be enjoy being a part of the community.

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Connection between Asset Development & Financial Literacy

Assets, such as savings account, homes, small

businesses, or training and education classes

can be accumulated through good money

management.

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Things You Worry About

My son is doing fine. He has his own room and doesn’t need to save money. Anyway if he works too much he’ll lose his Social Security and then what’ll happen after I die.

My brother lives with us and I don’t want anyone in his business. If he earns too much his Medicaid could stop. Our friends daughter had her Medicaid screwed up and it took almost a year before they got the Medical part straightened up. Besides, I don’t trust government programs.

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Questions about Asset Development

Are families supported to manage or direct

the subsidies they receive, if support is needed?

Cash subsidies may pose considerable administrative burden on families. How do families manage this issue and care? Are supports in place to assist them?

What steps are states taking to improve tax laws for families with limited financial resources?

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An IDA is an Asset Development program

What is an IDA?

IDA’s are individual savings accounts that encourage participants to save and provide matching funds ($3 to $1).

The account holder can use the matching funds for for home purchases (some rehab), education or training programs, or starting a business.

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Individual Development AccountsIndiana Policies—Qualified Individuals

What are the qualifications for having an IDA?

Individuals and members of the household have an annual income of less than 175% of the FPL

Individuals receiving public assistanceAgree to participate in the savings plan and

accompanying training

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Individual Development Accounts

Matching individual savings will be for a term of no more than 4 years

State matches $3 for every $1 the individual saves for the first $400 each year

Thereafter, the state may match $3 for every $1 saved each year up to $800 annually

Maximum match from the state is $ 4800 during the 4-year period ($1600 x $3 = $4800)

($1600 + $4800 = $6400)

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IDA example

The state cannot match more than $1600 in savings at a 3:1 rate.  This ONLY pertains to STATE FUNDS.  BOTH state and federal funds may be used to match accounts in excess of the 3:1 ratio. 

Example 1: Y1 - $400 Savings; matched $1200  ($400 * 3) 1200 Y2 - $600 Savings; matched $1800 ($600 * 3) 1800  Y3 - $800 Savings; matched $1800 ($600 * 3) 1800 ***NOTE:  Year 3 we only matched $600 of the participants $800 in

savings as, we can NEVER exceed in matching over $1600 in participant savings .

                Total Savings $1600 + Match $4800 = $6400.00

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Individual Development AccountsIndiana Policies—Allowable IDA’s

• IDA’s▫ Pay for costs of attending a post secondary educational

institution or vocational school for individual or dependent of the individual;

▫ Pay for costs associated with an accredited or licensed training program that may lead to employment for the individual or dependent of the individual;

▫ Purchasing a primary residence for the individual or dependent of the individual; reduce the principal amount owed on a primary residence of the individual or dependant; or pay for the rehabilitation of the individual’s primary residence; and/or

▫ Purchasing a business or expanding an existing small business;

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Individual Development AccountsIndiana Policies

Interest earned on IDA’s is tax exempt

Funds saved in an approved IDA are NOT considered in the asset test for Medicaid, SSI or food stamps

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Asset BuildingTools for accumulating assets and

organizations that

• Individual Development Accounts (IDA’s) can be used for this purpose▫ Purchase a home▫ Higher education and training▫ Starting a business

• Other tools: Benefit Information EITC Financial Literacy training College Savings Accounts Plan to Achieve Self-Sufficiency

accounts

Community Rehabilitation Programs (CRP’s)

United Way Agencies Community Action Programs Local banks & Credit Unions Indiana Benefits Information

Network Social Security Adminstartion

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Thinking Beyond Work Incentives & Assets

This means advancing skills and supports by:• Linking individuals with financial literacy resources• Linking with asset development programs• Planning for self sufficiency and greater

financial independence

This means thinking differently about:• Goals beyond employment• Providing different kinds of supports • Financial stability concepts

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Individual Development AccountsIndiana Tools and resources

• Check with VITA sites on IDA information shared with individuals

• Check out other financial literacy programs available in your community. Some of the programs used include:▫ FDIC Money Smart▫ Purdue Cooperative Extension▫ Bank On programs▫ The Indiana Medicaid Infrastructure Grant will be

awarding mini-grants to communities for collaborative efforts between disability organizations and community asset building/financial literacy coalitions

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Where to learn about setting up an IDA

About IDA’s:

http://cfed.org/programs/idas/ida_basics/

Indiana IDA application

http://www.housing-opportunities.com/pdf/IDA%20app.pdf

An Indiana success story: http://www.cfed.org/about/features/lburke/

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Who to contact about setting up an IDA

Call the Indiana Association of United Way

(317) 923-2377

Call the local Community Action Program (CAP)(317) 638.4232 or 1.800.382.9895

Call the local Purdue Extension office(765) 494-8491

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references

Assets. (2010). In Merriam-Webster Online Dictionary. Retrieved March 17, 2010, from http://www.merriam-webster.com/dictionary/assets

Sherraden, M. (2005). Inclusion in Asset Building. Testimony for Hearingon ”Building Assets for Low-Income Families” Subcommittee on Social Security and Family Policy Senate Finance Committee and Social Security, testimony, President’s Commission to Strengthen Social Security, April 28, 2005.

Disability Studies Quarterly, Vol 26, No 1 Winter” Copyright 2006 by the Society for Disability Studies

Making your Money Work, Purdue Extension Services. Purdue: West Lafayette, Indiana

Task Force on Financial Literacy

http://www.financialliteracyincanada.com/eng/about-financial-literacy/definition.php

Funded by the Medicaid Infrastructure Grant CFDA #93768

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