Banking Experience and Individual Development Accounts

Grinstein-Weiss, M., Yeo, Y. H., Despard, M. R., Casalotti, A. M., and Zhan, M. (2010). Does prior banking experience matter? Differences of the banked and unbanked in Individual Development Accounts. Journal of Family and Economic Issues 31, 212-227.

Brief Description: This study compares the saving performance and program participation of participants who owned bank accounts and those who did not prior to program enrollment in 14 Individual Development Account programs. Banked participants were shown to have higher average monthly net deposit, higher deposit frequency, and lesser odds of program drop out than unbanked participants. Program characteristics such as financial education, monthly saving targets, peer group meetings, and direct deposit are important predictors of program performance, and individual characteristics such as race/ethnicity, home ownership, and income are significantly associated with program performance.

Implications: This study’s findings suggested that participants with prior banking experience had better saving performance in IDA programs and lower risks of dropping out. These findings add to the mounting evidence that calls for policy makers to target efforts to those without banking experience. From the practice perspective, IDA programs should identify steps to increase the likelihood of saving success for participants with little or no banking experience and consider the importance of other predictors of IDA program success.