Most people would rather buy a lottery ticket than put money in a savings account. But Doorways to Dream, a nonprofit organization that aims to create savings innovations for lower-income individuals, is helping people essentially do both with its Save to Win program. The program offers prize-linked savings accounts. This means that every certificate of deposit of $25 or more purchased with a participating credit union “buys” a ticket for a prizewinning raffle. The program aims to make saving fun. It has the feel of gambling, but no risk.
The program has created 50,000 accounts with savings totaling $94 million. The program is open to anyone, but the organization describes most of its depositors as “financially vulnerable.”
These accounts have garnered the support of both liberals and conservatives. The accounts incentivize savings and promote good habits, while also emphasizing personal responsibility and reflect a private market approach to dealing with poverty. Many states are modifying their banking laws to allow credit unions to offer prize-linked savings accounts and Congress is reviewing bills to modify federal banking laws to offer these accounts.
Other nonprofits have started similar programs. Propel Schools, which operates charter schools in Pittsburgh, started a program called Fund My Future, which started a college savings accounts for each student. Every $10 deposit into an account earns an entry for the monthly lottery, which offers prizes such as gift cards to local restaurants and supermarkets. The Times reported that “[i]n the program’s first year, about 15% of the students deposited a total of $25,000.”
Don’t try this at home. Nonprofits must carefully consider applicable laws before venturing into this type of arrangement. Each state has different laws regarding lotteries and a nonprofit must be careful to follow them.
Has your organization tried an incentive program to encourage participation?