If you've had trouble building up a savings account, consider opening a prize-linked savings account (PLSA) at a local credit union. Minnesota residents have had this option since 2015. PLSAs have shown to be successful tools for those who have found it challenging to save money on a regular basis.
What is a prize-linked savings account?
Prize-linked savings accounts combine fun with the financial advantage of building savings. Here’s how they work. People open a savings account that gives them the chance to win cash prizes by making deposits. PLSAs treat deposits as tickets in a drawing. Small drawings happen every month and bigger drawings once or twice a year. PLSAs offer savers the opportunity to win cash with no risk of losing their savings.
Why are PLSAs successful?
Many people recognize the importance of building savings but have difficulty doing it. PLSAs give people an incentive to start saving money. The incentive of a chance to win a cash prize seems to be the nudge that people need to save. For instance, account holders in Michigan have saved more than $28 million since 2009. Here’s what one Michigan account holder said about her PLSA:
“If it wasn’t for (the PLSA), I wouldn’t have direct deposit. Now I have it and I like it. I started with $25 in my account. Now, I put in $100 every two weeks. Before this I had zero savings.”
Customers earn an entry into the next prize drawing for every $25 deposited in their PLSA. Customers can have up to four entries per month.
There is a fee if you make a withdrawal from an account less than a year old.
Learn more about Minnesota’s PLSA program.
You may also be interested in the following resources from the Consumer Financial Protection Bureau.
- Checklist for opening an account (also en español)
- Selecting Financial Products and Services(also en español)
Abbi, S., Hahnel, A., & Smith-Ramani, J. (2013). Building financial security through fun: findings from the save to win expansion. Allston, MA: Doorways to Dreams Fund.
Credit Union National Association. (2016, March 18). Minn. N.Y., N.C. report prize-linked savings success.
Doorways to Dreams Fund. (2015). Prize-linked savings: Creating financial confidence and opportunity.
Reviewed in 2019