Senate Bill 1055 has been introduced in California, allowing banks and credit unions in the state to offer prize-linked savings (PLS) products to their customers. This would make California the 28th state to pass PLS legislation, opening up a fun and exciting way to save.
Prize-linked savings products are proven to engage consumers in the act of saving and to help them build their financial security. Prize-linked savings accounts are a tested, successful concept in which consumers earn chances to win by saving in insured financial institutions or through government offered products. Deposits act as entries into prize drawings which reward consumers for saving. By injecting fun and the excitement of winning into the act of saving, prize-linked savings products have incentivized first-time savers, generated long-term savings, and attracted new customers to financial service firms who offer these products.
Since 2009, over 75 thousand individual prize-linked savings accounts have been opened resulting in over $175 million in cumulative savings. An average of $2,429 is saved in each account and $2.37 million has been awarded in prizes.
Prize-linked savings accounts are reaching critical groups of consumers and successfully encouraging them to save. Almost 90% of accountholders in the 3 largest credit union programs (Save to Win, WINcentive, and Lucky Savers) are financially vulnerable, 49-59% had no emergency savings and over half of accountholders had high debt. The accounts have created a no-lose proposition for savers: consumers keep their deposits, plus whatever interest they accrue, whether or not they win additional prizes. These accounts provide an incentive for people to save more, making the act of savings fun while also encouraging a habit that will help financially vulnerable families become more secure and resilient in the face of financial shocks.