Prizes for savings would benefit people, state

By Joe Hearn

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Traditional financial education doesn't resonate with some consumers and therefore more innovative, out-of-the-box methods must be tried.

So, what would motivate Iowans to save more? Prizes? Cash? What if you could have a chance at winning prizes and cash while saving money and not putting any of your savings at risk? Iowa's not-for-profit, member owned credit unions want to help Iowans build savings by offering a prize-linked savings program where every participant wins.

Prize-linked savings programs provide incentives to consumers to save more money on a regular basis by offering various prizes tied to a unique savings account. The promotions are fun and keep the saver motivated to save throughout the year.

The result is a learned behavior of savings and more money in Iowans' pockets.

For example, for every $25 put into such an account at a credit union or bank, the saver would receive a chance to win prizes through a raffle. The member's money remains safe in their account and accrues interest, in addition to receiving chances to win prizes.

Whether or not savers win additional prizes, they still have the money they saved plus the interest accrued. These accounts are a no-lose proposition.

Better yet, this new prize-linked savings approach has proved successful in other states and has been championed by Harvard Business School professor Peter Tufano and the non-profit he founded, Doorways to Dreams Fund. Eight Michigan credit unions introduced this to the U.S. in 2009. In 2010, more than 16,500 Michigan residents opened accounts through the contest, saving $28.1 million that likely would not have been saved otherwise.

Specifically, a survey of the program found that 56 percent of participants hadn't saved regularly before and 59 percent spent money on a lottery in the previous six months.

The time is right for our state to increase its focus on savings habits to shore up household finances and strengthen Iowa's economy as a whole. A prize-linked savings program, which requires no public subsidies or taxpayer expense, could help more Iowans build a stronger fiscal foundation.

Rhode Island, Maine and Maryland have passed legislation to enable these programs and Iowa, Washington, Nebraska and New Mexico have pending legislation.

Iowa credit unions ask Iowa legislators to support Senate Study Bill 1019 and House Study Bill 22 and pass this important legislation.

Joe Hearn, COO of Dupaco Community Credit Union, is chair of the Iowa Credit Union League. Comments: jhearn@

dupaco.com