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Prize-Linked Savings Accounts
Posted on 11/29/17 at 8:12 am
Posted on 11/29/17 at 8:12 am
The latest Freakanomics Podcast talked about PLS Accounts, which are legal in Michigan and soon to be in Texas.
Basically, it is like a lottery run by banks where the money you put into it is never lost.
Instead of your savings earning an infinitesimal amount of interest over time, the collective interest of the group is pooled and that money is distributed at regular intervals to a randomly selected group of investors.
Even if you don't win, you still have your original capital and can do with it what you will.
I believe in Michigan, every $100 you put into one of these accounts buys you another "ticket".
Seems like a win-win situation to me and a good way to get people to save more.
Of course, legislators and lobbyists may think otherwise.
Basically, it is like a lottery run by banks where the money you put into it is never lost.
Instead of your savings earning an infinitesimal amount of interest over time, the collective interest of the group is pooled and that money is distributed at regular intervals to a randomly selected group of investors.
Even if you don't win, you still have your original capital and can do with it what you will.
I believe in Michigan, every $100 you put into one of these accounts buys you another "ticket".
Seems like a win-win situation to me and a good way to get people to save more.
Of course, legislators and lobbyists may think otherwise.
This post was edited on 11/29/17 at 8:14 am
2
Posted on 11/29/17 at 11:50 am to Salamander_Wilson
I listened to it as well. I didn't realize they were coming to Texas. Anything to get people to save more money is a great thing.
I would be interested to know if you take a hit on interest rates in exchange for the upside of the "lottery"
There is never a free lunch.
I would be interested to know if you take a hit on interest rates in exchange for the upside of the "lottery"
There is never a free lunch.
Posted on 11/29/17 at 12:19 pm to kaaj24
I believe the trade off is you don't gain any interest. All of the interest goes into the pool. Some is taken by the banks for profit I'm sure, and the rest is divided out as prize money.
Posted on 11/29/17 at 12:49 pm to Salamander_Wilson
I’m only about 20 min into the podcast but so they may address it, but what is the incentive to continue contributing to the savings account after an initial deposit?
Posted on 11/29/17 at 5:57 pm to Golfer
I believe every $100 you put in gives you a better chance of winning...like buying another ticket.
Posted on 11/29/17 at 6:58 pm to Salamander_Wilson
I would take part in something like this.
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