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Volume 7, Issue 2, 2007   Federal Reserve Bank of Dallas

New Mexico Encourages Citizens to Save

Low-income residents in New Mexico now have more incentive than ever to save for a home, an education or their own business.

In the 2006 legislative session, the state provided $1.5 million to fund the Individual Development Account Act that passed in 2003. This onetime funding provided the first statewide access to matched savings. In the 2007 legislative session, New Mexico became one of only a handful of states to authorize permanent funding for IDAs.

IDAs are interest-bearing savings accounts in which deposits made by individual account holders are matched with funds from state and federal contributions. The accounts must be used for specific purposes, such as making a down payment on a home, paying for postsecondary education expenses, or starting or expanding a small business. They can also be used for home repairs or the purchase of a vehicle.

Account holders are required to deposit a minimum of $1 per month in the custodial account and complete an extensive financial education course to learn the basics of budgeting, credit and debt management, banking, insurance, long-term planning and avoiding predatory lending.

New Mexico's IDA program is one of many state-supported programs in the U.S. that are promoting self-sufficiency and helping working families build appreciable assets. State funding in these programs helps leverage federal funding available through the Assets for Independence grant program.

Educational Efforts

Recently, the Dallas and Kansas City Federal Reserve Banks hosted luncheons in New Mexico and invited representatives of local financial institutions and community leaders so they could learn more about state-supported IDA programs. Assets for All: Building a Future of Hope for Families and Communities luncheons were held in Las Cruces, Roswell, Albuquerque and Farmington.

Over 150 people attended the events, which featured presentations from the three New Mexico organizations selected to deliver the match to eligible savers: Community Action New Mexico, HELP–New Mexico Inc. and WESST Corp.

One speaker at the Albuquerque luncheon was New Mexico State Rep. Janice Arnold-Jones, who spoke passionately about the need for financial education. She told of growing up in a single-parent household in which her mom not only struggled to raise several children on a limited income but was further burdened by a lack of knowledge about the most basic financial tools.

One of the IDA program's strongest components is the requirement to complete 10 weeks of financial education classes. Savers are then equipped to acquire not only the asset they've been saving for but the financial skills to maintain it and build additional family assets.

Jennifer Silva of Las Cruces is an IDA account holder through Community Action New Mexico's program. Silva, a single mom who works full-time and goes to school part-time, told her story to attendees at the Las Cruces luncheon. She pays over $700 a month to rent a small apartment but is saving for her first home. She says she looks forward to the day when her son will have a yard to play in instead of an apartment balcony.

Community Involvement

According to Ona Porter, executive director of Community Action New Mexico, a goal of this asset-building work is reintegration of communities. She pointed out that "we don't work together like we once did," adding that, in her father's day, a person who lost his job would have seen the community rally to help.

According to Porter, "The number one indicator of the time a person will spend jobless is the number of people in the middle class the person knows."

To address that need, Community Action New Mexico reserves 20 percent of the seats in its financial education classes for the community at large. This allows clients to develop relationships with community members who can connect them with resources to get questions answered and problems solved.

Banking Industry Support

Although state funding of the IDA program has gone a long way toward supporting expansion of asset-building opportunities in New Mexico, much more help is needed.

In addition to contributing funds for matching and providing program management and financial literacy classes, banks and financial institutions can help by providing no-fee, interest-bearing savings accounts to IDA program participants.

Bankers are also needed to present information about basic savings and checking account products at financial education workshops and classes.

New Mexico Savers Programs

Community Action New Mexico

Community Action New Mexico is the statewide association of Community Action Agencies. Its eight member agencies provide services for New Mexico's IDA program throughout the state. The Community Action Agencies have developed a mix of services over the years—for example, food and shelter, education and training, and help with heating bills—to stabilize the lives of vulnerable people. The services are geared to allow low-income working people a chance to move into jobs with wages that will support a family.

In 2004, the Community Action Agencies worked together to create the New Mexico Assets Consortium. The consortium involves the combined effort of the Community Action Agencies, Tax Help New Mexico and the New Mexico Project for Financial Literacy. The Community Action Agencies provide case management, IDAs and other programs; Tax Help offers free tax-preparation assistance; and the Project for Financial Literacy provides financial education courses using volunteer certified financial planners across the state.

One innovation of the Assets Consortium is the linkage with postsecondary students majoring in business and accounting. Tax Help New Mexico recruits and trains the students to prepare individual tax returns using IRS training programs; the students receive college credit for the training and for assisting at community tax sites. As a result of this unique collaboration, Community Action was named Best Practice in the U.S. for 2006 by the Institute for Social and Economic Development.

For more information about Community Action New Mexico, go to www.communityactionnewmexico.org 

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HELP–New Mexico Inc.

HELP–New Mexico administers the program statewide from offices in Roswell, Espanola, Las Cruces, Las Vegas, Gallup and Albuquerque, with outreach to surrounding communities and rural areas.

HELP was started as the Home Education Livelihood Program in 1965 by the New Mexico Council of Churches. The organization has provided services to over 800,000 individuals and families, including migrant workers, self-employed farmers and ranchers, low-income families, seniors and disadvantaged youth. Among the many services HELP offers are adult education, youth development, job training and placement and assistance to home day care providers.

The HELP–New Mexico IDA program allows savers to put money aside for home renovation or repair and car purchase. Funds saved for those purposes are not allowed under the federal programs, so they are matched at a ratio of 2:1 rather than the 4:1 offered for home purchase, education or business ownership.

HELP case management starts with a client asset-acquisition plan and includes personal financial education, tax preparation assistance and, if needed, credit repair services. Asset-specific training such as homebuyer education is also required. Case management services also include crisis intervention to help clients deal with unanticipated financial needs that may jeopardize their savings plans.

For more information on Help–New Mexico, go to www.helpnm.com 

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WESST, or Women's Economic Self-Sufficiency Team, facilitates the start-up and growth of women- and minority-owned businesses in New Mexico. It provides IDA services in Bernalillo, Doña Ana and Sandoval counties.

Since its beginning in 1988, WESST has assisted over 1,950 fledgling small businesses, which have created 2,800 jobs. WESST offers business consulting and training and provides small-business loans to individuals who are unable to obtain financing from traditional sources.

Participants in the WESST IDA program complete a 10-week financial literacy course on saving, budgeting and managing credit, followed by monthly meetings. Jennifer Craig, Southwest regional manager for WESST, is hoping to recruit bankers and other community leaders to serve as advisers and speakers for these meetings. She says the program changes lives, and seeing that happen provides the inspiration that she and other service providers thrive on.

For more information, go to www.wesst.org 

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e-Perspectives, Volume 7, Issue 2, 2007

Federal Reserve Bank of Dallas Off-site page
Community Development Office Send an e-mail
P.O. Box 655906, Dallas, Texas 75265-5906
Gloria Vasquez Brown Send an e-mail
Vice President
    Alfreda B. Norman Send an e-mail
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Jackie Hoyer Send an e-mail
Houston Branch
Senior Community Development Advisor
    Julie Gunter Send an e-mail
Senior Community Development Advisor
Wenhua Di Send an e-mail
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    Elizabeth Sobel Send an e-mail
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Roy Lopez Send an e-mail
Community Development Specialist
The views expressed are the authors' and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Community Development Office.

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