Recently, the New York Times published an article about the trend among some credit unions to offer “prize-linked savings accounts” as a means of encouraging saving by low-income families. The article explains that the “Save to Win” program currently operating in Michigan, Nebraska, Washington and North Carolina is an example of an effort to change financial habits by tapping into a tendency among low-income and financially vulnerable individuals to rely on lotteries and gambling as a means of improving their financial situation. The offering of cash prizes for making deposits into a savings account generates higher rates of saving.
While the effort is only possible at credit unions at the moment, the article explains that Congress and state legislatures are exploring ways to remove barriers to allow the expansion of prize-linked savings accounts to other financial institutions and additional jurisdictions. In communities with credit unions willing to partner with housing authorities, the possibilities of introducing prize-linked savings accounts as part of a larger financial literacy initiative could mean the difference for moving residents to self-sufficiency.