NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Melissa Schettini Kearney, Peter Tufano, Jonathan Guryan, Erik Hurst

NBER Working Paper No. 16433
Issued in October 2010
NBER Program(s):Law and Economics, Public Economics

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.

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Document Object Identifier (DOI): 10.3386/w16433

Published: 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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