I heard about an interesting program designed to help non-savers start saving. It uses a little bit of self-inflicted trickery, but it if those who have never saved a dime, start saving successfully – it’s a winner – isn’t it?
Americans save less than they spend on gambling
According to an article over at Yahoo Finance…
“In 2007, the latest year for which final numbers are available, Americans spent $92.3 billion on legalized gambling… that same year, says the U.S. Bureau of Economic Analysis, Americans saved only $57.4 billion”
What I take away is that if people were paying themselves first (in savings), they wouldn’t have much to gamble away. But instead many of them are gambling away their limited disposable income, and in turn don’t have much (if any) to save.
The Lottery
We probably all know, have been, or currently are people who regularly play the lottery. The chance of winning $10 million is so tempting that our minds fail to properly take the terrible odds into consideration. As many personal finance books suggest, if regular lottery players saved and invested the money each week, they would eventually have a jackpot of their own – with much better odds.
When I used to work downtown, I would occasionally stop into the gas station in the poorer neighborhoods. I remember seeing a worker come in and cash his paycheck and immediately purchase $70 of scratch-off tickets. I watched as he stood next to the cashier scratching them off one by one. I would love to think this was rare occurrence, but it seemed to be a regular activity of those who lived in that neighborhood.
A couple trips to this gas station helped me to understand why many call the lottery “a tax on the lower-class.”
The “Save to Win” program
If people are more interested in the chance to win the big prize than they are saving, why not create a tool that combines both?
Thankfully, a finance professor from Harvard did just that. Earlier this year a savings program called “Save to Win” was launched in Michigan for members of eight select credit unions. The basic premise is that people who increase their savings are eligible to win a $100,000 jackpot.
“…it is a cross between a certificate of deposit and a raffle ticket. Members who put $25 or more into a Save to Win one-year CD are entered into a monthly “savings raffle” for prizes up to $400, plus one annual drawing for a $100,000 jackpot. Only Michigan residents are eligible to participate.”
It seems to be working. In the 6 months the program has been running it has attracted over $3.1 million in new deposits – many of which were from people who not been successful saving in the past.
What do you think? Would a program like that incent you to save more money?
{ 7 comments… read them below or add one }
I have some mixed feelings on this, but overall I suppose it’s a good idea. My only concern would be the person who has never saved money and instead bought lottery tickets upon winning $100K would simply go out and blow it all.
Also, the savings versus gambling spending sounds rather questionable to me. But I see how it helps to make the point and the point is probably a fairly valid one.
At first I wasn’t sure about this. But the more I thought about it…I don’t believe it is gambling because you have nothing to lose.
Even if you don’t “win”….you still are still saving money…which is a bonus win in itself.
And if you do “win”….then, consider that a bonus.
It’s not like you have a greater chance of winning by saving more…that may have some undesirable side effects. But I think it is an out the box way to promote savings.
It is a great idea,one can not lose. The savings can be very good.
Years ago I had the credit union take but $5.00 out of weekly pay.
I work for sven yeas befor changing jobs. I reinvested into CD’s I am much, much older now and recieve a vey good income for life. It all started with a mere 5′er.
With so maney deposits I could of been a $100,000.00. But, more importent is, ” I am already a winner” I saved. No stock 401ks, no no so called real investments, JUST SAVED> I have never lost a penny by saving.
PRAISE the LORD>
WNM
i think it is a great idea – perhaps not perfect since it is still motivated by greed somewhat, but better than blowing it all on lottery tickets.
I really respect the intentions of this program– people aren’t perfect, and sometimes we need a little incentive to do the responsible thing, i.e. saving. That said, there’s something ridiculous about this idea. Rather than tricking people into investing, what about spending money on educating them? If you can hammer home the reality that regular investing leads to big money over time, maybe you can get people to accept it and do it on their own.
Then again, people will always dream of free money. And they’ll always spend money to get it, lol.
It wouldn’t encourage me to save more, but I think it’s a great idea for some people. If it gets people saving, than it’s a good thing
It’s not a rare occurrence; I once worked in a convenience store and we had ‘regulars’ who would plop down substantial (to me) money, buy lottery tickets, and spend what seemed (to me) an interminable session scratching them off. (Some preferred the numbers games like Powerball, and took thjeir tickets home to wait for the results.)
I had a (sorta) similar idea this morning after seeing an online “What If?” lottery ad. (What if you won the Powerball jackpot, etc.)
What if you socked away and invested that $25 per week you spend on lottery tickets?
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