Institute Trustee Fellow Brooke Lewis writes for NJ.com:

Tamika Thomas was a single mother struggling to make ends meet despite working two jobs. After overcoming a period of homelessness, Tamika aspired to one day own a home, a cornerstone of the American Dream. Yet, most of her income went toward paying rent, leaving her with very little money to save.

Unfortunately, Tamika’s struggle is common – even in New Jersey, one of the wealthiest states in the nation. The United Way estimates that nearly 40 percent of New Jersey households struggle to afford basic expenses related to housing, health care, child care, transportation, and food. For households of color, the struggle to save and build wealth is particularly pronounced, as revealed by our state’s staggering racial wealth gap: The median net worth for white families in New Jersey is $309,396. By contrast, the median net worth for black and Latino families last year was just $5,900 and $7,020, respectively.

New Jersey can do more to close the racial wealth gap and create more financial security for families. Last month, the New Jersey Institute for Social Justice released a report, Reclaiming the American Dream:Expanding Financial Security and Reducing the Racial Wealth Gap Through Matched Savings Accounts, advocating for the creation of a new, state-based Individual Development Account program.

Our research finds that state residents — especially people of color — are facing financial obstacles in pursuing their dreams, like attending college or starting a small business. Many also lack enough savings to weather life’s unexpected financial emergencies that we will all inevitably face. If a family member becomes sick, or a spouse loses a job, many of our friends and neighbors would need to take on more debt or would fall into poverty.

Individual Development Account programs, or “IDA” programs, offer participants matched savings accounts and financial education to assist them in obtaining a wealth-building asset — like a home, post-secondary education, or a small business. For participants, an IDA is similar to a 401(K) savings account. IDA program participants contribute to their account, often on a monthly basis, and those contributions are matched at a certain rate by the program, just as an employer will often match an employee’s contribution to a 401(k) account.

New Jersey currently runs a federally-funded IDA program through the Department of Community Affairs. The program is available to employed people whose families are current or former recipients of public assistance through Work First New Jersey, which is New Jersey’s Temporary Assistance for Needy Families program, and who have an income that does not exceed 200 percent of the federal income poverty guidelines.

While this federally-funded IDA program is helpful to residents who qualify for participation, New Jersey can do more to reach all people struggling to save, many of whom have incomes above the federal poverty line, leaving them ineligible to participate in the current program. Our report outlines several policy recommendations for creating a new and expansive state IDA program, including broadly defined eligibility requirements, flexible asset goals, sufficient staffing and accessibility for participants, match rates designed to incentivize saving, and a tax credit policy to raise matching funds.

Giving people the tools to save and acquire assets does far more than provide a financial safety net for hard times; it gives people, and their families, permission to dream. With over a million households struggling to get by month-to-month, people in New Jersey don’t have the time or money to even consider making that business idea a reality or finally going back to school to get their degree. Our residents deserve to work for something more than survival. Dreaming should not belong to the wealthy.

Finally, IDA programs are proven to work. A national study revealed that after three years, IDA program participants were 35 percent more likely to be homeowners, 84 percent more likely to be business owners, and nearly twice as likely to pursue post-secondary education as non-participants. In fact, through participating in New Jersey’s current federally-funded program, Tamika became the first single woman in her family to own a home.

Tamika’s success serves as a call to action for New Jersey to expand these wealth-building opportunities through an inclusive, state-based IDA program that will create more financial security for families, help close the racial wealth gap, and ultimately bring the “American Dream” back within reach to the people of New Jersey.