Ever feel like there's no payoff for filling up a savings account at a bank these days? With interest rates on deposit accounts seemingly inching lower every week, it's hard to get excited about the long-term benefits of regular saving.
In an attempt to encourage people to do just that, credit unions in an increasing number of states are turning to "Save to Win" programs, according to an article from Jim Rubenstein that appeared this week in the Credit Union Times:
The "Save to Win" raffle program, which links savings accounts with prize giveaways, should be ready for a Nebraska rollout Jan. 1 with some eight to 12 CUs expected to participate, the Nebraska Credit Union League said Thursday.
Credit unions in Michigan were the first to feature the program, and their success has inspired credit unions in other states to seek permission from state lawmakers to pursue similar programs. From Rubenstein's article:
There are now 40 credit unions taking part in Michigan and a $100,000 grand prize has been awarded. More than $9 million has been saved in the11,000 accounts opened.
"I think we will be the first after Michigan to really get a full rollout of Save to Win," said Luetkenhaus with the Nebraska league.
North Carolina lawmakers also have passed enabling legislation for a Save to Win program, as has Washington state.
The idea for the program was created by a coalition of consumer groups trying to figure out how to get people, particularly those in lower income brackets, to build savings that would insulate them against financial emergencies and build wealth over time.
While it's probably a great way for credit unions to attract deposits and new members, and I think, in general, people are much better off at credit unions than at most banks or at no bank at all, I have two issues with the program:
- I'm afraid the programs will be siphoning off money that could be used to pay members higher yields on savings accounts, which helps all members, not just prize winners.
- A lot of the problem with the general public's ideas on wealth building is that they are centered around the get-rich-quick scheme of the moment, whether that happens to be tech stocks or real estate, or now, gold. Selling people on gradual saving by offering instant cash prizes is a little like selling people on the benefits of education by randomly awarding some students instant PhDs. Sure, it will probably get more people to enroll, but you risk teaching people that winning instant giveaways are the key to wealth, rather than gradual accumulation of savings.
What do you think? Are these programs a good idea to encourage people to save, or just a gimmick?