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

Melissa Kearney, Peter Tufano, Jonathan Guryan () and Erik Hurst ()

No 16433, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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 non-savers--and discusses the laws and regulations in the United States that largely prohibit their issuance.

JEL-codes: G21 G28 H30 K3 (search for similar items in EconPapers)
Date: 2010-10
Note: LE PE
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Published as Kearney, Melissa S., Peter Tufano, Erik Hurst, and Jonathan Guryan. “Making Savings Fun: An Overview of Prize-Linked Savings,” in ed. Olivia Mitchell and Ammamaria Lusardi, Financial Literacy: Implications for Retirement Security and the Financial Marketplace, Oxford University Press, 2011.

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