A Family Savings Account, or FSA, is a great way for Pennsylvanian families to build up a nice little nest egg. Community non-profits work with low-income families to build a savings plan. Once you’ve met your goal, the organization will meet your savings dollar for dollar up to $2,000. So even though you’ve only saved 2k, you can walk away with 4k. (Be proud of yourself for that 2k. It’s not easy.)
How do I qualify?
In order to qualify, your income level must be at 80% of the area median income level or less. The most recent numbers available to me for Pittsburgh make that $52,100 or less for a family of four, and $44,700 if you’re closer to Philadelphia. (The numbers will change based on your locale; take these as ballpark numbers not gospel.)
Despite the name of the account, you can be an individual and still qualify.
How long do I have to save the money?
Generally you have 2 years to save the money, but depending on the contract you sign you may have 12 or 36 months, as well. You must save an average of at least $10/week or $40 a month.
What can I use the money for?
What you use the money for depends on the options that are available at the agency you end up working with. Most of the time the funds are used for:
- Purchase of a home.
- Purchase of a used/new vehicle to get you to work or school.
- Making repairs to your current home.
- Starting a new business or expanding a current one.
- Educational costs for you or a dependent.
Do I have to do anything other than save the money?
Yes. Some organizations will require you to come to an orientation. But all require you to attend classes they provide on financial literacy. (There’s no way this could be a bad thing. Financial education is always a great idea, and will only help you reach financial independence quicker.)
Should I have any other concerns?
Yes. If you receive food stamp benefits in Pennsylvania, you are only allowed to have up to $5,000 in assets before losing those benefits. (This excludes one car and your home if you own one.) As much as I hate to advocate against savings, you really need to sit down with the organization that is providing your Family Savings Account and figure out a game plan in case the combined savings and match of $4k will prevent you and your children from eating. Don’t completely abandon the idea of savings, but go in and talk with someone about the reality of your situation before signing any contracts.
Where can I get a Family Savings Account?
In Pittsburgh, ACTION-Housing, Inc. offers them. The YWCA used to, but I cannot confirm that their program is still in operation. (Call them to check. They may not immediately pick up, but are good about returning voice mails. Even if their FSA program isn’t still open, they do have a myriad of other programs that may be able to help you in your situation, enabling you to allocate more of your own funds towards your positive financial goals.)
In other areas of the state, including other areas in Western PA, I’d check with my local branch of the United Way. If they don’t offer a program directly, they will most likely be able to put you in touch with a local organization that does. If that does not work, it may be worth the headache of getting in touch with someone at your local welfare office.
Do other states offer anything like this?
Yes. The state of Indiana offers a similar program called Individual Development Accounts (or IDAs.) Click here for more information.
The Positives of FSAs
Family Savings Accounts can be a major boon to people who are trying to get out of poverty. Yes, there is the matching, but the accountability provided by working with one of these organizations makes you more likely to keep on track. The financial education classes are a wonderful bonus that we could use across all economic classes, regardless of income. (A lot of those nice, middle-class neighborhoods are financed through some serious and debilitating debt due to lack of financial responsibility.)
But the biggest positive to FSAs is that they can help the large majority of those on welfare who desperately want to become independent, but have found themselves running in circles in their effort to escape poverty.