June 27--For most of the 21st century, there have been enormous disincentives for Americans to try to save money.
Interest rates have been horribly low for more than a decade. Because of easy credit, debit cards, automated teller machines, overdraft aids and credit cards, people are encouraged to access their funds quickly and overspend.
Payday loan, check cashing and title loan joints also encouraging overspending and charge huge fees for that privilege. Now special "Save to Win" certificates of deposit with prize-linked accounts are encouraging people to save by offering something for nothing.
For every $25 invested in a balance-building certificate of deposit, account holders are entered in a drawing for a chance to win annual jackpots. Last year prizes were $5,000 to $100,000 in addition to smaller monthly amounts. People can enter up to 10 times a month for the term of the CD.
Oh, and don't forget the taxes on the winnings. Sixty-two credit unions in Michigan, Nebraska, North Carolina and Washington state offer the prize-linked accounts, The Kansas City Star reports. Other states have plans to follow.
Sen. Jerry Moran, a Kansas Republican, and Rep. Derek Kilmer, a Washington state Democrat, have introduced legislation that would clear the way for states to authorize federally chartered financial institutions to offer prize-linked accounts. Here's why.
In Kansas, 32 percent of households do not have any savings accounts, and 34 percent are "liquid asset poor," which means they don't have enough in the bank to cover basic expenses for three months in case of unemployment, medical emergencies, car wrecks or other unexpected tragedies.
Instead of people pouring money into lottery tickets, they get to keep their earnings and still have a shot at winning prizes. But what about those poor lotteries and the money from them designated for education?
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