One of the more interesting things I read recently was a story on CNN Money about credit unions that offer savings lotteries. In state’s where it’s allowed, credit unions can offer savers lottery “tickets” in exchange for opening CDs. For each $25 a person adds to their CD account, they get another “ticket” — up to whatever monthly limit is in place.
These CD accounts allow savers to put more money into them, but they can’t withdraw the money before the term is up without running into a penalty, which is the case with any CD. Credit unions might offer small monthly prizes and rewards for savers, but the real prize is the grand prize of $25,000 that some members win. Usually, there is a group of credit unions banding together to offer the annual grand prize, so you’re “competing” against credit union members statewide. But it’s still an exciting prospect. You could win!
Credit unions are the only financial service providers in on the act. The app SaveUp encourages you to save by offering rewards and prizes, and a shot at a $2 million jackpot. This puts a new spin on the concept of a lottery.
Savings Lottery
One of the the things I like about this idea is that you are being rewarded for setting money aside. If you participate in one of these savings lotteries, the money you put in grows (albeit slowly) and you have the chance of winning a decent chunk of change that could really help your financial situation. Even if you don’t win, though, you have still bettered your financial situation. Contrast this with gambling lotteries in which you pay your money — and it’s gone.
The chances of winning the lottery are very small, and they’re even smaller if there’s a huge jackpot. When you spend money on lottery tickets, that money just goes by the wayside. With a savings lottery, at least the money you spend goes into a bank account and you have the chance to earn interest. And, while putting the money in a CD might not be as good as investing it, it’s still better than spending it on something that won’t benefit you in the long run.
A savings lottery also has the potential to encourage the habit of saving. Part of the battle with setting aside money is getting into the habit of saving. If you are rewarded each time you add money to your CD account, you get in the habit of adding that money. Eventually it becomes second nature. Hopefully, at some point, you’ll even boost the amount you set aside and consider branching out to increase how much you add to a retirement account or that you invest.
For too long our society has focused on consumerism and encouraging poor financial choices. There has been this idea that spending is its own reward, when really it’s not. The rise of savings lotteries is a step in the right direction — a direction that rewards consumers for saving their money, rather than spending it.
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