IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Decision Risks and Individual Development Accounts: An Alternative View

Listed author(s):
  • Edmund Khashadourian


    (United Way of Greater Los Angeles)

Registered author(s):

    This article analyzes the impact of risk on decisions made by the poor within the context of the Individual Development Account (IDA) program. IDA is a matched savings program designed to help low-income households invest in appreciating assets. For these households, the risk involved with participation in IDA relates to the sacrifice they make by reducing current consumption - sometimes in a significant way - in order to be able to save. The program does not offer a match on savings per se; rather, it offers the match only when savings are invested in certain assets. Since there is no guarantee that IDA savings will be converted into assets qualified for the IDA match at the time of enrollment, participation in the program is characterized as an inherently risky decision, which is governed by different sets of behavioral factors, including the risk-taking preferences of low-income households. Consideration of risk provides an alternative explanation for issues related to program take-up, inactivity, and attrition rates. It also offers new and simple ideas on how to improve results. In addressing these problems, the article recommends using an IDA model that includes a flexible match component, to insure against the risk of unmatched savings and complement the existing IDA match structure. Simple modifications to current policy will maintain the total cost of IDA match at the existing levels. Introduction of a flexible match may mitigate the risk of decision to participate in IDA for the most vulnerable group of participants. It can also potentially reduce the percentage of inactive accounts while improving the overall retention rates in the program. Moreover, the recommended changes would not alter the nature of the IDA program, as the flexible match would only amount to a fraction of the total asset investment match.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Fulltext downloads are only available to subscribers. See JID website for details.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Journal of Income Distribution in its journal Journal of Income Distribution.

    Volume (Year): 18 (2009)
    Issue (Month): 2 (June)
    Pages: 142-159

    in new window

    Handle: RePEc:jid:journl:y:2009:v:18:i:2:p:142-159
    Contact details of provider: Postal:
    York Hall 327, 2275 Bayview Avenue, Toronto, Ontario M4N 3M6

    Phone: 416-487-6712
    Fax: 416-487-6852
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:jid:journl:y:2009:v:18:i:2:p:142-159. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Timm Boenke)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.