Match Rates, Individual Development Accounts, and Saving by the Poor

Individual Development Accounts (IDAs) provide low-income people with matches for savings used for home purchase, post-secondary education, or microenterprise. Match rates for the 2,350 IDA participants in the American Dream Demonstration (ADD) were typically 1:1 or 2:1 but ranged as high as 7:1. This paper looks at how these match rates were related with the likelihood of saving something and with the level of savings. The model controls for a number of confounding factors often ignored in similar studies of match rates in 401(k) plans. For IDAs in ADD, higher match rates were generally associated with a greater likelihood of saving something and—for participants who saved something—a lower level of IDA savings.