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Prize Linked Savings - encouraging people to save

Finances, MoneyEdward KiledjianComment

We all know people love to play the lottery. For only a couple of dollars, they can dream big dreams for a week. The sad truth is that many people choose to play the lottery instead of building a nest egg. After all, putting a money aside is good but it doesn’t carry the chance of winning big. Or does it?

There is an interesting invention (in some parts of the world) called a Prize Linked Savings account. It allows people to save money while giving them the thrill of the lottery (all without risking a penny). The concept is simple, it collects the interest accumulated by all of the savers in the plan and awards it (via random draw) to one lucky person. Everyone else get’s to keep their money. In the UK, it is called a Premium Bond.

A South African bank tried this scheme to encourage the population to save. The response was so overwhelming that it impacting the South African government’s lottery revenue so they sued the bank and stopped the program.

A Prize Linked Savings Account test was run in the state of Michigan and the results were interesting: “56 percent of the Michigan participants in the program were non-savers prior to the program”. 


Unfortunately many jurisdictions (including my own – Canada) make this type of program illegal to ensure there is no competition to the state run lottery corporations. Changing the laws to allow for these types of unique and attractive savings mechanisms is simple but politicians lack the will to push them through. After all, government is addicted to spending our money.