Helping Americans Save to Meet Financial Goals

By Nada Shawish

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In the “The Wonderful Wizard of Oz,” a tornado strikes rural Kansas and farm girl Dorothy is knocked out with a blow to her head. When she comes to, her aunt and uncle’s home is sent up into a whirlwind with her inside.

Floating in the cyclone, the house is in shambles, and everything seems lost as Dorothy crouches down in horror.

Many Americans have felt like Dorothy during the past several years, huddling with their families as the recession swirled around them and tore at their livelihoods.

For those who were already living on the edge, like Neima Naeem, the financial crisis has been a devastating shock.

“We just don’t have a chance to get out of this cycle,” she says.

The financial crisis has made living nearly impossible for millions of Americans, but some organizations are offering solutions to help people get back on track. Individual Development Accounts are giving people a second chance and a way out of poverty.

Shattered Dreams

Neima immigrated to the United States several years ago looking for more opportunities—a better life, the “American Dream.”

But that life was nowhere to be found. School programs were too expensive, and she couldn’t manage to secure a reliable job with an income that she and her disabled son could actually live on.

When the financial crisis hit, Neima’s financial situation quickly spun out of control.

Today, an estimated 26 million Americans do not own enough to survive at the poverty level for three months. More than 50 million Americans currently live in poverty, and an astounding 17 million of them are children.

Minority and female-headed households are suffering in even greater numbers.

At least 25% of female-headed households have zero or negative net worth, and more than 30% of minority-headed households have zero or negative net worth.

While the economy has shown signs of improving, it’s hard to see that down in the trenches. Unemployment rates are getting lower in the United States, but families are still losing homes and unemployment is still twice the rate it was in 2007. New jobs being created are mostly part-time positions averaging only $19,000 a year. That is well under the annual income considered the national poverty line for a single individual.

For people who don’t have an education or specialized training, prospects of financial security are really slim.

“If you don’t have money and you don’t have an education, you don’t even have a chance,” Neima says. “You can’t do what you need to do or what you want to do with your life.”

A Way Out

When asked what she needed to get started toward the kind of stability she wanted for her family, Neima replied, “Money.” She knew what she needed to do and how to do it. She just needed the money to start. But for Neima, like millions of other Americans, funding is hard to come by, especially when starting from scratch. Without any way to save money or access to credit, she was stuck trying to scrape up enough money to live on, without a chance for growth.

But Neima found a way to break free from this cycle. She started the business she had always dreamed of—a beauty salon just for women that offers hair, nails, skin care, henna designs, and makeup tutorials.

“I wanted to provide a service to women of the community,” said Neima.  “I wanted to offer an option of having a more private salon, just for women. We never had that before.”

The tool that helped her break out was an Individual Development Account, or IDA.

She found out about IDAs from a friend, and soon after signing up, she was finally on her way to getting her cosmetology certification and business licensing, which were too expensive for her to get on her own.

IDA programs teach people how to save and handle their finances, and give them a boost with their savings. New participants work toward reaching a financial goal, like starting a business, getting an education, or buying a home.

One such program, through Islamic Relief USA and Capital Area Asset Builders, plans to make IDAs available to residents of the greater Washington, D.C., and Baltimore area. The goal is to equip families in need with financial knowledge and match the amount they are able to save to help them build a better future.

The Individual Development Account program through Islamic Relief USA and Capital Area Asset Builders will offer people like Neima the starting point they need—one that can help provide the support to start something new.

First, participants are required to open a savings account, and set a goal for an asset to save for. Then, savers are required to complete a Money Management course and subsequent training related to their specific goal. Finally, participants save each month and watch their money grow.

When families reach their savings goals, they receive matching funds.

“I saved $2,000,” Neima said. “I was so proud of that. And then my IDA matched it with another $2,000. This kind of money was so valuable. I couldn’t have started my business without it.”

Islamic Relief USA’s IDA program will match savings at a rate of $3 for every $1 participants save.

Research from the Office of Refugee Resettlement (ORR) and the Assets for Independence program (AFI) suggest that IDA programs aren’t just a temporary fix. They work. IDA participants are 35% more likely to own a home, twice as likely to attend college, and 84% more likely to own a business.

Better Days Ahead

Since 1999, more than 1,000 program sites have helped more than 80,000 people to save, build their assets, and pursue education, training, and business opportunities.

As for Neima, now there really is no place like home.

Her in-home business is doing well, and she now has regular clients who come to her for her beauty services.

“For people like me, this really gives them a chance—helps open doors,” Neima says, “I’m just thankful for this opportunity. Now, I can take care of myself. It feels good.”

And she has even bigger goals. One day she hopes to move to a bigger space where she can employ other beauticians and grow her business.

She’s building her own yellow-brick road, one brick at a time. All she needed was a few tools to get started.

“After all,” she smiles, “you have to start from the beginning so one day you can grow.”