Saving stimulus

Prize-linked accounts aim to foster positive behaviors

Posted on Nov 28, 2018 :: Banking
Jessica Thiel
Posted by , Insight on Business Staff Writer

Many are familiar with the little rush that comes with buying a lottery ticket, the “what if” idea that germinates with the possibility of winning millions. Most also know the odds are not in their favor — the Allstate Data Science Team estimated the odds of winning the $999 million Mega Millions and Powerball jackpots were 1 in 88 quadrillion.

When the Wisconsin Credit Union League took in the statistics around people’s savings habits and lottery ticket purchases, it saw the prize-linked savings account program as an ideal way to get people to save more while offering them a chance — with reasonable odds — to win money.

In November 2017, the Wisconsin State Legislature unanimously passed a bill allowing credit unions and other financial institutions to offer prize-linked savings accounts. The state joined 27 others — four states only allow credit unions to offer the accounts — in approving the program.

The Wisconsin Credit Union League and credit unions around the state have embraced the program, which the league calls Saver’s Sweepstakes. It rolled out statewide on Sept. 1. Accountholders receive an entry for each $25 increase in their account, up to six per month. The state league, which runs the program, selects 45 $100 winners each month, four $1,000 winners quarterly and one $5,000 winner each year.

Tara Krejcarek, vice president of strategic partnerships for the Wisconsin Credit Union League, says the program helps make saving fun and appealing.

“I always compare it to, it’s like eating your vegetables. It’s not fun, but you know you have to do it,” she says. “Lottery games, sweepstakes … they attract people. It’s the thrill of winning. Prize-linked savings or our Saver’s Sweepstakes really ties the thrill of winning to saving.”

Krejcarek says the statistics around saving are sobering, with 29 percent of state residents living in liquid asset poverty, which measures a household’s ability to cover basic expenses for three months in the event of an emergency. At the same time, statistics show Wisconsinites spend more than $80 million each year on lottery games, and it’s the poorest third of all households purchasing half of those tickets.

Kristina Flores, vice president of marketing for Appleton-based Prospera Credit Union, says those figures made Prospera want to offer the program.

“Those stats were alarming, and this was a great way to sort of go all the way back to the root of it and say, ‘Here’s a product that does something similar, but ends up being a win-win because you’re building the savings account,’” she says.

The program benefits both credit unions and their customers, Flores says. It allows credit unions to grow their business while encouraging members to increase savings and giving them a chance to win prizes.

On National Credit Union Day in October, a Prospera member won $100 in the drawing. It may not be $1 billion, but Flores says the winner planned to put the money in a Christmas fund — and all who increase their savings win by creating more financial security.

In 2017, 165 credit unions in 13 states participated, racking up more than 32,000 prize-linked savings accounts. Accountholders saved nearly $73 million, with 5,379 people winning money, according to Commonwealth, a national nonprofit organization dedicated to strengthening financial opportunity and security for the financially vulnerable.

Amy Nelson, products and services manager for UnitedOne Credit Union, says the program is generating excitement among its approximately 19,000 members. In addition to participating in the state drawings, the credit union, which has locations in Manitowoc and Sheboygan, offers its own drawings in which it hands out $25 to three winners each month.

The program provides another tool for connecting with members and furthers credit unions’ mission of “People Helping People,” Nelson says. “It just fits well with our strategic goal to help our members build financial strength and just encouraging them to save instead of trying to rely on other means.”

Krejcarek says Saver’s Sweepstakes is producing all kinds of positive outcomes, including people starting savings accounts or college funds for their kids. In addition, the program allows credit unions to attract or engage people they might not have in the past.

Saver’s Sweepstakes is also growing. Fourteen Wisconsin credit unions participated in the first drawing in October. In 2019, 20 credit unions will participate, and the prize pool should exceed $75,000. Krejcarek says she anticipates continuing to add credit unions, and with that, grow the prize pool.

“(It’s a) win-win-win,” Krejcarek says.
“It’s going to help your members, it’s going to help the credit union and communities 
in general because we’re helping our members become better savers and improving their financial wellness.”

 

Prize-linked savings accountholder statistics

86 to 90 percent were financially vulnerable

40 to 67 percent were not regular savers

51 to 66 percent had no emergency savings

37 to 57 percent were asset poor

49 to 52 percent had high debt

Source: Commonwealth