Saving money by gambling?

I came across an interesting article in the New York Times that really grabbed my attention.  At first, I figured that it was a joke, but then I realized that it was for real and does actually work!

For most folks, when faced with the chore of putting away money as compared to the allure of winning mega bucks in a lottery, the majority will forego of the first and go with the second, hoping to get their hands on the proverbial “pot of gold.”  The article outlines how an increasing numbers of credit unions and nonprofit groups are now using prize-linked savings accounts to get folks to save money.  Essentially, every deposit is treated as a ticket toward a prize-winning raffle.  The author states that, “The idea is to offer the thrill of gambling without the risk. Even perennial losers keep their savings.”  He adds that, “One of the goals of these programs is to help change financial habits.”

Although these accounts form a small portion of those available in the world of banking, they are slowly growing in number.  One program created 50,000 accounts for a total of $94 million dollars.  One credit union gets account holders to buy one-year certificates, and for every $25 share that they purchase, they get an entry into the monthly lottery.  Another credit union offers “monthly prizes ranging from $25 to $100, a few quarterly prizes of $500 to $1,500, and one $30,000 jackpot.”  One customer said that she “got addicted when [she] won $100, and [she] was thrilled to death.”  Not bad at all!

Sounds too good to be true!  There must be a catch, right?  For some accounts, the catch is that the money can only be withdrawn for emergencies.  For other accounts, there is a penalty if the money is withdrawn early.  The only other catch is for the US Congress to modify federal banking laws and permit more financial institutions to offer prize-linked accounts.  Time will tell what will come of it!

All I can say is, “Wow!”  I hope that this takes root in Canada as well!  Imagine a world where people have money in retirement rather than being poor.  All that is left to do is to get more people to participate.  If, for some reason, there are barriers to this idea or people choose not to take advantage of it, I for one will simply…blame it on fast foods.

- B. J. T. Pepin