Making Savers Winners: An Overview of Prize-Linked Saving Products

Melissa S. Kearney, Peter Tufano, Jonathan Guryan and Erik Hurst

in Financial Literacy: Implications for Retirement Security and the Financial Marketplace

Published in print October 2011 | ISBN: 9780199696819
Published online January 2012 | e-ISBN: 9780191732089 | DOI:

Series: Pensions Research Council

Making Savers Winners: An Overview of Prize-Linked Saving Products

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For over three centuries and throughout the globe, people have enthusiastically bought savings products that incorporate lottery elements. In lieu of paying traditional interest to all investors proportional to their balances, these prize-linked savings (PLS) accounts distribute periodic sizeable payments to some investors using a lottery-like drawing where an investor's chances of winning are proportional to one's account balances. This paper describes these products, provides examples of their use, argues for their potential popularity in the United States – especially to low and moderate income nonsavers – and discusses the laws and regulations in the United States that largely prohibit their issuance.

Keywords: lottery; prize; saving; accounts; income; products; households; gambling; investment

Chapter.  8869 words.  Illustrated.

Subjects: Pensions

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