A banking program related to a measure introduced by U.S. Rep. Derek Kilmer, D-Gig Harbor, has been named a “top impact innovation” by the Center for Financial Services Innovation.
“Prize-linked savings” was named as one the best ways to encourage workers and families to save more by offering rewards for savings.
Kilmer introduced a bipartisan bill last October with U.S. Rep. Tom Cotton, R-Ark., promoting the American Savings Promotion Act, which seeks to help reverse a decline in Americans’ personal savings rates by allowing more financial institutions to offer prize-linked savings accounts.
The accounts are typical savings products that offer participants the chance to win prizes. The more participants save, the more chances they have to win prizes. Consequently, those saving are also strengthening their safety net and preparing themselves to meet future financial needs. Money in the account is never at risk – so even if someone does not win a prize, they still maintain all of their savings.
The News Tribune recently featured a $5,000 winner from Rainier. In Washington, a handful of credit unions offer the program.
“More people are taking notice of research showing that if folks have the chance to win a prize for saving money, they are more likely to save for rainy days,” said Kilmer in a release Tuesday.
“Today, many Americans aren’t saving enough to be prepared for what life can throw at them – a lost job, a medical emergency, or even a broken water heater. Whether someone is buying a house or figuring out how to pay for school, it can be valuable to have the savings to get closer to that goal. This is a great way to make that happen. The best thing that can happen is you win significant financial prizes. The worst thing that can happen is that you’ve saved money.”
Kilmer previously sponsored and passed legislation in the Washington Senate to bring prize-linked savings accounts to Washington. Currently, eight states have passed legislation allowing financial institutions to offer these regulated products. However, due to outdated federal regulations, banks and federally chartered financial institutions are unable to offer prize-linked savings accounts. The American Savings Promotion Act would remove this regulatory barrier and ensure more consumers can access these safe financial products, without creating a new government program or spending federal resources.