Individual Development Accounts: A Unique Cleveland Program
Lorna Jordan- All the King's Men Barber Shop at Saint Claire Avenue and 91st street stands in stark contrast to much of the area. Part of the street is littered with trash and broken bottles. But the Barber Shop is clean and bright with cream colored walls. There are three shiny black barber chairs and a manicure station. Joseph Green is the owner of the shop and cuts hair as well. Despite his current success, he used to have a 200-dollar a day cocaine habit. And for ten years he was in and out of prison. Now with the help of WECO, Green is a small business owner.
Joseph Green- I had a lot of help at City Mission and then after that WECO stepped in and strengthen my ability to the business aspect of it. The IDA program was some extra money to put into the existing business. I did that for nine months and I'm using that to enhance the barber shop.
LJ- Green saved money through the IDA accounts and was able to plow the money back into his business. Sandra Buckner, the IDA administrator, says the program is trying to help people move up the economic ladder.
Sandra Buckner- The Cleveland Individual Development account program is a matched savings and leveraged account program. Our participants save a minimum of 20 dollars a month, they attend nine months of financial education and we match their first 750 dollars in savings two-dollars for every dollar they are saved.
LJ- The majority of participants in the program go on to save additional money in their credit union accounts. And for many people this is the first time they have ever saved any money. George Barany is the Executive Director of WECO.
SB- It levels the playing field for those people who are not necessarily benefiting from this booming economy, but have an ambition to realize the American Dream whether it's home ownership, education or a business.
LJ- The majority of participants are at or slightly above the federal guidelines for poverty. Laurie Murphy, WECO Associate director, says even though these people don't earn much money they have learned to cut corners.
Laurie Murphy- It allows folks to take a look at becoming an informed consumer and to make those decisions that allow them to think that they can do it over and over again as a springboard for financial responsibility.
LJ- Murphy adds their clients must continue to budget for the rest of their lives. People in the program must be really motivated. Murphy argues that the participants must have long range plans to succeed. Šthey just need some guidance on where to go and how to navigate the system. They also need some positive reinforcement.
LM- It takes discipline. It takes changes of behavior. Most of use got where we are over periods of time. And we're trying to change lifelong habits in a short amount of time. And not everyone can do that.
LJ- WECO prefers to work with other agencies to get referrals so their clients have some kind of support network in addition to what the program can provide. George Barany says the program functions strictly on largess.
GB- We have now more than 38 private corporations, religious institutions and foundations that donate money and administrative help to the savings planŠ.They have to raise more than 810-thousand dollars to match the funds of the participants. In two years of fundraising they have received about half the amount needed.
LJ- Barany says this program has a huge economic impact. He says it pumps 22 million dollars into the Cleveland economy.
WECO estimates that 70-percent of the accounts are used for home ownership and 25-percent toward education.
Case Western Reserve University Banking Professor David Bowers says the 200-percent return on the dollar is better than any financial institution can provide and he notes it's not a program open to the rich.
David Bowers- But of course the wealthy and even the middle income have the 401K where the government in effect matches by not taxing it, you can build up substantial funds unfettered by taxes, changes the compound interest rate dramatically.
LJ- The Cleveland initiative is part of a national pilot program in 100 cities across the nation. In addition to the matching money, a bill is being considered in Congress that would provide tax breaks to those participating. And that's something Joseph Green of All The King's Men barber shop would welcome.
In Cleveland, I'm Lorna Jordan, 90.3 WCPN, 90.3 FM.