Purpose: Economic hardship appears to be higher for families with dependent children compared to other household types. Empirical evidence suggests that families with children also face more difficulties to save than other households. Though motivations to save may not differ between household types, and may be stronger for families with children, the costs associated with raising children significantly impact saving outcomes. A relatively new policy to encourage savings among low-income families is the Individual Development Account (IDA). IDAs are matched savings accounts, targeted to low-income people and provide institutional structures for savings. IDA programs have generally made little or no distinction between participants with or without dependent children. Yet, the experiences and challenges facing participants with children, are likely to be different. The purpose of this study is to examine the experiences of IDA participants with dependent children.

Methods: This study utilizes data from the American Dream Demonstration, which is the first large-scale test of IDAs that followed over 2,000 participants for four years. The sample consists of 1,801 IDA participants with dependent children. In the analysis phase, descriptive statistics are produced to characterize this group. Then, a hierarchical Ordinary Least Squares (OLS) regression analysis is conducted. The first step of the hierarchical regression explores individual characteristics associated with saving among IDA participants with children. The second and third steps of the hierarchical regression answer two additional questions: (1) Controlling for the effects of individual characteristics, what institutional characteristics are associated with saving for this group? (2) Controlling for the effects of individual characteristics, do institutional characteristics [measured (step 2) and unmeasured (step 3)], as a block, affect the saving performances of IDA participants with children?

Results: The regression results indicate that all of the institutional variables and several individual variables are associated with savings for IDA participants with children. Specifically, among individual characteristics race, education, employment, and income are associated with savings. Assets ownership is also associated with increased savings for this group. Turning to institutional characteristics, direct deposit, hours of financial education, match rate, and monthly saving target are significantly related to savings. In addition, the results of the hierarchical regression indicate that controlling for individual characteristics, the measured institutional characteristics, as a block, significantly increase the variance explained in AMND for families with children. Adding the measured institutional characteristics to the model as a block increases the variance explained in AMND in 11% (R2=.26), and adding the program dummies (unmeasured factors linked with programs) as a block accounts for an additional 4% increase in AMND of the variance (R2=.29).

Implications: Participants with children in IDAs have the ability to save toward accumulation of assets. Results indicate that institutional factors, not merely individual characteristics, are highly associated with IDA savings, and are important in explaining saving performances in IDAs. These findings support the institutional theory and suggest that asset-building policies may enable more low-income families with children to save and accumulate assets. Specific recommendations to better design and promote programs such as IDAs for this group are provided.