MADISON, Wis. (1/15/16)--While consumers from around the world looked to cash in on the $1.6 billion Powerball jackpot this week, credit unions in many states offered a much more pragmatic and mathematically realistic alternative: prize-linked savings (PLS) accounts.
The accounts, designed to encourage savings, work by offering members entries into cash-prize drawings each time they deposit a set amount of money into savings.
There's no risk for the members, as those who lose out on prizes still win in the form of healthy savings accounts. At a time when many people lack funds for even basic needs, these accounts are financially sound alternative to traditionally lotteries.
In Texas, Andrea Marshall, a member of Neighborhood CU, Dallas, last week won $25,000 for her participation in the credit union’s prize savings account program. A surprised Marshall opened her front door Tuesday morning to a group of Neighborhood CU leaders who hand-delivered a $25,000 prize as a reward for her good savings habits.
Neighborhood CU members receive one drawing entry for every $25 monthly average balance in their prize savings accounts. The greater the savings, the greater the chance a member has of winning. Members are eligible for monthly drawings and quarterly $10,000 drawings. At the start of each year, a winner is drawn for the $25,000 grand prize based on the average monthly balance in the savings account at close of business Dec. 31.
“Andrea Marshall is a shining example of how a person can reap tangible rewards by building good savings habits,” said Carolyn Jordan, Neighborhood CU senior vice president. “She is a consistent saver, setting aside a little bit of each paycheck to pay herself first.”
In Michigan, “Save to Win” was developed in 2009 as a way to encourage low- to moderate-income residents to develop better savings habits. Product manager Jessica Thelen said the program offers the incentive of winning a prize without the risk (Public News Service Jan. 13).
“When you buy that lottery ticket or a scratch-off, that money's gone like if you were to go to the casino," said Thelen. "With a savings account, regardless of the drawing outcome, the winner is going to have that savings account, plus interest.”
A high percentage of Save to Win participants are considered financially fragile, a population Thelen said tends to spend more on state lotteries than those who are well-off. While the odds of winning with Save to Win are much better, she said the prizes aren't meant to compete with Powerball or other lottery jackpots.
"Even though it's not a million dollars, $5,000 is still enough to change someone's life, or make their life easier, or help them out in their day-to-day life," said Thelen.
Save to Win was launched in Connecticut April 2015. Connecticut credit union members finished the year with nearly half a million dollars saved and have received thousands paid out in prizes.
Save to Win gives state residents the chance at winning up to $5,000 just for saving their money. Prizes range from $25 for monthly drawings and offer $500, $1,000, and $5,000 drawings quarterly. Credit union savers earn entries for every $25 they save in a given month, with a maximum of 10 entries per month.
Currently, credit unions are authorized to conduct prize-linked savings programs in 15 states. Those states are Michigan, Rhode Island, Maine, Washington, North Carolina, Nebraska, Maryland, Connecticut, Indiana, New York, Arkansas, Illinois, Minnesota, Oregon and Virginia.