Mar 16 2007
Prize-based Savings Products
According to the Federal Reserve’s 2004 Survey of Consumer Finances, only 47 percent of American families currently have savings accounts, a decrease of eight percentage points from 2001. The Brookings Institution estimates that there are 8.4 million Americans with annual incomes of less than $25,000 and no checking or savings account.
What’s more, every year Americans pour their hard-earned money into slot machines, blackjack tables, poker games, and other forms of legalized gambling. According to Harvard Business School Professor Peter Tufano and UC Berkeley RWJF Scholar Daniel Schneider, Americans—including many low-income earners—spent nearly $80 billion on gambling entertainment during 2003, at a time when the national household savings rate was heading toward zero and would soon slide into negative numbers.
This brief introuces an idea for credit unions to develop an account that encourages savings by offering an opportunity to win attractive prizes along with no chance of losing the investment.