Educational Status and Savings Performance in Individual Development Accounts

This study examines the relationship between education and savings performance in Individual Development Accounts (IDAs), a matched savings program for the poor. We also investigate whether the relationship between education and savings is mediated by income, intended uses of IDAs, and program (or institutional) factors. The data of this study is from the American Dream Demonstration (N = 2,50), the first national demonstration of IDAs. The results indicate that, compared to the participants without a high school degree, those with some college education, especially those with a 4-year college degree, had higher savings, after controlling for program factors and other individual factors in the model. Household income, intended uses of IDAs, and program characteristics were related to savings outcomes; income and two program factors, monthly savings target and financial education, also partially mediated the relationship between education and savings outcomes. These findings may help design and implement more effective savings programs for the low-income population and its varying segments