Were you aware that you may qualify for savings match programs to get free money towards your savings goals? Let's take a look at qualifications.
Why am I so passionate about matched savings programs?
Because it's so important to not just think about getting through this month, or about making this paycheck work. You need to be thinking about next year, the next five years, and retirement (no matter how far away you are).
And this is especially true if you're trying to figure out how to save money while living paycheck to paycheck.
After all, do you want this cycle of anxiety and financial difficulty to perpetuate ad infinitum?
Nah. Not you. You want abundance for yourself, and freedom from money anxiety.
But you're probably wondering how to save money for all of that, especially when lacking a drool-worthy income?
Fortunately for people struggling with anemic savings due to a low or moderate-income level (that’s right – you don’t need a “low” income to qualify for some of these programs, so keep reading!), there are several savings match programs out there.
Yes, you read that correctly: there exist programs that match your savings for both your short-term and long-term goals.
How cool is that?
Let’s take a look.
Types of Programs that Match Your Savings – Free Money Programs
The types of savings match programs that will give you matching dollars to the amount that you save towards your own savings goals fall into a few different categories:
- Nonprofit and Government Matched Savings Accounts (example: IDA savings programs and matched college savings programs)
- Bank/Organization Matched Savings
- IRS Tax Incentives for Retirement Savings
- Employer Matched Savings
Let's take a look at each of these plus see if you qualify.
Savings Match Programs #1: Individual Development Accounts (IDAs)
What are IDAs? These are special savings accounts where program funders (a combination government, non-profits, and financial institutions) match money that low and middle-income households put into savings to go towards specific goals.
While each program is different, no matter which program you choose, for every dollar that a person puts into an IDA account, another dollar or more is matched by the institution (many programs match each dollar with an additional $3!).
The “development” part of this program comes in the education given to IDA holders. Participants learn about budgeting and saving as well as receive additional training before purchasing an asset. Required training could look like: completing four workshops on personal finance as well as some one-on-one coaching (think of what you can learn!).
What your savings goal money is to be used for is up to both your needs as well as the individual development account requirements you are enrolled in. However, all IDA programs aim to help you build assets. Once you reach your savings goal, you can withdraw the money upon approval from your program sponsor.
Here are some typical asset-building savings goals:
- purchasing a home (IDA program for homebuyers)
- repairing a home
- paying college tuition/textbooks
- paying for job training
- building your emergency savings fund
- starting a business or expanding a business
Search over 500 IDA programs nationwide to find one near you (IDA programs near me) + more info in this IDA program directory (there’s even an IDA program near me!).
Your eligibility can depend on a variety of factors, such as individual development account income limits, your household net worth, debt ratio and even credit history. A typical household income range for eligibility is within 200% of the poverty line. Also note that these programs are limited, and so everyone who applies and is eligible does not get in. Some programs host lotteries to give everyone a fair shot. So, be sure to apply to several!
Psst: need help setting savings goals? Here's the 5 types of financial goals, how to prioritize savings goals (when you've got multiple things you want to save for at once), and saving money motivation.
Savings Match Programs #2: Down Payment Assistance Programs
Are you a first-time homebuyer who is trying to save up for a down payment for a house?
Every state has at least one down payment assistance program.
These come in the form of:
- Grants (do not need to be paid back)
- Loans (second mortgage)
- Loans (second mortgage – forgiven over a set number of years)
Click here to find local down payment assistance programs and requirements to you.
Hint: make sure you have the finances to buy a home without becoming house poor.
Savings Match Programs #3: Private Savings Match Programs
There are both organizations and banks that will offer a savings match program of some sort for various reasons.
1. SaverLife.Org: $10 match/month (as available)
With this program – funded by nonprofit EARN – for each $20 you save in a month (up to 6 months), they’ll reward you with a $10 match!
You need to sign up, connect your savings account with them, and make sure you put in at least $20/month for the next six months.
At the end, you’ll have $240 (of which you only had to put in $180!). Rewards are distributed at the end of your program, at which point you complete an exit survey and wait for the money to be directly deposited into your account.
Actually, the only requirements are that you’re 18, you’ve got a valid email address, and your savings account is located within the United States.
2. Bank Opening Bonus
Another type of savings match program that also happens to be one of my favorite money saving tips? Are bank account opening bonuses. You know, where you open a new savings account or checking account at a bank and get free money for doing so.
There are always terms and conditions to meet when doing this, such as the length of time you must keep your money in the account, or the amount you need to open the account with, etc. So you want to make sure that any bank opening bonus you’re going after is actually worth it (click on that link and I’ll show you how).
Savings Match Programs #4: IRS Tax Incentives for Retirement Savings
Check out these tax incentives for saving for your retirement.
1. Saver's Tax Credit
The Saver’s Tax Credit is a non-refundable tax credit that helps middle and lower income households set aside money for retirement by providing a tax credit for doing so.
You put the money into retirement savings and then it’s “matched” by you getting money back from the IRS, come tax season.
Pro tip: when you get that refund? Actually put that money directly into your savings account or retirement account so that you are taking advantage of this match.
There are a multitude of plans that you can contribute to in order to qualify, including:
- Traditional or Roth IRA, a 401(K) plan
- 403b or 457
- SEP, or SIMPLE plan
- voluntary employee contributions to a qualified retirement plan as defined in section 4974(c) (including the federal Thrift Savings Plan)
- contributions to a 501(c)(18)(D) plan
- ABLE account contributions, where you're the designated beneficiary
The credit of up to $1,000 is a percentage of your qualifying contribution amount – from 10% to 50% (the higher percentage is given to households that make the least) – and you must subtract distributions you have taken from a qualifying retirement account before figuring out the percentage of tax credit available to you.
In order to apply for this credit, you need to fill out IRS Form 8880: Credit for Qualified Retirement Savings Contributions.
Financial eligibility for this credit is based on adjusted gross income with the following limits:
- $66,000 or less for married filing jointly
- $49,500 or less for head of households
- $33,000 or less for married individuals filing separately or singles
Bonus tip: If you meet income requirements and contribute to a traditional retirement account, then you can combine both the Saver’s Tax Credit AND the traditional IRA deduction discussed below.
2. Traditional Individual Retirement Account (IRA) Tax Deduction
You may qualify for a tax deduction on your traditional IRA savings contributions if your modified adjusted gross income meets a certain threshold and you meet certain eligibility requirements.
- Contribute Earned Income to a Traditional IRA: This deduction is only good for money contributed to a traditional IRA, which is a tax-deferred retirement account (meaning you pay taxes on the money upon withdrawal in retirement). Furthermore, you must have contributed “earned income”, not just money from something like investment earnings.
- Adjusted Gross Income: The adjusted gross income maximum for contribution is dependent upon whether or not you have a retirement plan available to you at work (if you don’t, then there are no income limits on this tax deduction), whether or not you’re married to someone who does, etc. If you have a 401(k) available at work, then the tax deduction benefit phases out between $66,000 – $76,000 for you, or $105,000 to $125,000 for couples.
The current maximum you can contribute is $6,000 for your own IRA, or $7,000 if you are 50+.
Savings Match Programs #5: Employer Matched Savings Programs
Your employer can play a big role in your savings life by actually offering to match savings. There's a few ways that they typically do this.
Employer College Match Savings Program
Check with your employer to see if they have a college match savings program using a 529 Plan as part of your workplace benefits package. Just like with your 401(k), you would open this through your employer, and they would match a certain percentage or maximum amount of contributions.
Beware of two things:
- Tax Consequences: Any matched savings contributions made to a 529 Plan by your employer are going to be taxed in that tax year.
- Missed Matching Contributions Elsewhere: There are 27 states plus the District of Columbia that have 529 plans with matched contributions (via deductions or credits) from the state. So, you want to make sure you aren’t missing out on a better deal by going with your state’s plan.
Employer Retirement Account Match Programs
Check with your employer to see if they have a retirement savings match program, such as a 401(k) or a Roth 401(k). If so, not participating in it means you’re leaving free money on the table!
With these plans, employers will typically match a percentage of what you elect to automatically deduct from your paycheck into your 401(k) retirement account. Matches are generally capped at either a percentage or a dollar amount.
For example, if you contribute 6% of your income towards your 401(k), and your company matches 50% of your contribution, up to 3%, then you would get the full 3% match into your retirement account.
What a great savings perk!
- Contribute to Your Employer’s Retirement Plan: In order to get the matching contribution, you must participate in your employer’s plan.
- Meet Certain Contribution Caps: There are IRS contribution caps (currently, an employee may not contribute more than $54,000, or 100% of their salary, in each year to their employer retirement plan), as well as employer caps on the amount they’ll contribute in matched money.
- Vesting Schedule: Many employers have a “vesting schedule”, meaning you have to remain at the company for a certain amount of time before their matched savings contributions to your plan truly become yours. You may be vested after 3 years, or 50% of the matched money is vested at the end of 2 years, or any other type of rule they put into place.
I hope that these savings match programs add to your ability to create and fund your savings goals, both short-term and long-term. Take the time to develop good savings habits + maximize the money you are putting away. Your future self thanks you!
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