Special Savings Accounts Provide Safety Net for Youth on Their Own

April 01, 2008

"The main thing they helped me with is money management," Fogelbach said of the program. "I worked seven days a week, and I would go and spend all my money. But right now I'm ahead. I have all my bills paid. I have money in the bank, and I still have some money to go out and have fun."

St. Louis Post-Dispatch (MO), Dec. 5, 2007, author Greg Jonsson

At age 21, how many young adults can say that? Especially those who have just left, or "aged-out" of, the foster care system and have no support system to fall back on.

The "they" in the above quote is the United Way of Greater St. Louis and the University of Missouri Extension. "The program" is a ground-breaking initiative called The Youth IDA Pilot Program. And Fogelbach is Mike Fogelbach, 21, who recently aged-out of the foster care system in St. Louis. He was featured in a St. Louis Post-Dispatch article about his experience in the program.

What is an IDA?

IDAs are individual development accounts that allow low- to moderate-income working people to participate in a matched-savings program. The savings then help them acquire assets such as education or down payments on housing. Participants are recommended by caseworkers and must complete 12 hours of financial education. At the end of the program, if participants have met their savings goal and taken part in budget and credit counseling, the savings is matched by a participating sponsor.

The concept of IDAs was developed by Washington University Professor Michael Sherraden, who says that welfare policy should be based on the concepts of saving, investment and accumulation of assets rather than the model of income, spending and consumption that was the norm into the early 1990s.

How the Youth IDA Project Began

"Basically the local PBS affiliate, KETC Channel 9, came to us one day and wanted to do more to help the foster children in our region," says Cassandra Kaufman, a community investment director with the United Way of Greater St. Louis. "A piece had aired on their station about foster kids and how tough it could be for them."

The issue at hand was to create a program to help youth leaving foster care make a successful transition to independent living. After learning about the IDA program for adults and the work United Way had been doing with it, professionals at KETC-TV Channel 9 believed there was a possibility to rework this program for youth. And in 2005, the Youth IDA pilot project was born.

In its role as convener, United Way brought several agency partners and the University of Missouri Extension to the table quickly to discuss an effective way to launch the program. The creators knew working with youth in the foster care system would not be the same as working with adults or even other youth who grew up with a family support system.

"Exponentially, the youth in foster care have a much tougher time than other kids going out on their own," Kaufman says. "These kids have many more stressors in life—they're often younger, many are parenting children, many need a place to live, need transportation, need education, they haven't had the resources to learn how to live on their own, low job skills, no money and they simply do not have the family support to fall back on if or when anything goes wrong."

Many statistics exist to support Kaufman's statements. Foster care studies have shown that four years after leaving foster care, 62 percent have not maintained employment for one year, 46 percent lack a high school diploma, 42 percent have become parents and 38 percent have been diagnosed with some sort of emotional problem.

"We began working with four local agencies that worked with foster kids, and they told us what barriers existed for these kids once they aged-out," Kaufman says. "They were: needing a place to live, saving money for that and help with the transition into living on their own. We came up with a curriculum we felt would really work for these kids. We learned that their age and circumstances made these kids more likely to be focused on the now, and not the future. And we knew we had to try and help them understand the importance of saving.

"We were lucky enough to find the Jim Casey Foundation's 'Building Assets for Your Future Financial Literacy' curriculum that they provide free-of-charge and we used it for a base.

It's been educational to see these kids go through the classes, Kaufman says. "We've seen some of the kids take the test to opt out of the class, and not do well—and you can see the light bulb go off in their heads. They thought they knew the information and didn't. It's also been great to see the kids helping each other in the classes. Things we take for granted, balancing a checkbook for example, is something they've never learned to do. We try to make the classes as interactive as possible."

Who Are These Youth and What Happened Next?

Each organization involved played a critical role in developing this project.

KETC-Channel 9 served as the initial convener, bringing United Way and agencies that serve foster youth to the table around the aging-out issue. The University of Missouri Extension took the Jim Casey Foundation curriculum and tailored it specifically for this project. They then had a total of three professionals teach the classes. United Way gathered the organizations together, provided the matching funds and provided program oversight.

The four agencies—Covenant House Missouri, Epworth Children's Home, Family Resource Center and Youth in Need—determined which of the teens aging out of foster care would benefit most from the proposed program and got them involved. Each agency identified 10 youth to take part in the pilot program. The only criteria given to the agencies was that the youth needed to be working at least part time and have a source of earned income to save.

The youth involved came from one of three situations:

  • those receiving case management and living in a foster home or residential setting;
  • those living in a residential setting and participating in transitional or independent living programs; or
  • those who had left the system, became homeless but somehow found themselves back in the social service system.

The majority of those chosen to participate were living in transitional or independent living programs.

In July 2006, everything was in place to start. The classes for the program were set up to begin that fall. The 40 hand-selected young men and women met one day for the kickoff event at KETC to learn about the Youth IDA project. During that day, they learned that they would need to take 12 hours of classes on financial literacy, housing and nutrition. They also learned that throughout the 18-month project they would need to save $1,000. If they did so, that savings would be matched 2:1. Each youth would then use his $3,000 or part thereof to make an asset purchase.

In October 2006, 34 of the original 40 began the Youth IDA pilot program by taking classes and opening savings accounts."Most of these kids did not have any kind of savings account," Kaufman says. "Another great partner in this project has been US Bank. They were behind this from the beginning and hold all of the savings accounts for these kids."

The classes were given in two-hour segments and held periodically through the end of 2006 and most of 2007. In order for the participants to receive their matched savings or to make a matched withdrawal, the educational classes had to be fulfilled.

"Since this began, seven of the youth have reached their $1,000 savings goal, and four have completed the program and purchased their asset," Kaufman says. "Three of them bought cars and one of them used the savings toward first and last month's rent and a security deposit for an apartment. Through January, 2008 these 34 youth have saved a total of $14,700.

"To watch these kids understand and realize they can make it and that there's help to do so-it's been an amazing process to be involved with. I look forward to this program expanding to serve more youth aging out of the foster care system in the future," Kaufman says.

The 18-month pilot period ends this spring.

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Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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