Americans' lack of savings has become a crisis. Our confidence that we've got enough saved for retirement is at historically low levels, according to the
Our society tries to push people to save. Various incentives make it less painful. But since they largely rely on the tax code or employer-based savings plans, they don't reach a large percentage of Americans — the very people who need to save most and find it the most difficult.
There is a financial product, however, that Americans use enthusiastically, especially the people who most need to save: we buy lottery tickets.
Lotteries aren't usually considered part of the solution to our savings crisis. They're usually cited as a big part of the problem. Lotteries offer the worst odds in legal gambling — about 55 percent of what people pay for tickets is paid out in prizes. Yet we spend an average of
We buy lottery tickets because it's fun — a brief hope break in a dreary day. And for the poor, a lottery ticket isn't necessarily an irrational purchase. What other way exists for a poor person to get rich, or even to amass enough money for a down payment on a house? ''A high percentage of low-income players view a lottery as a form of financial planning,'' said
The lottery is the one pathway to wealth where poor people have an equal footing with rich people. Lottery players know the chance of getting rich with a lottery ticket is infinitesimally small. The point is that without one, the chance is zero.
What if saving could be like a lottery?
The idea of rewarding savings with prizes dates from at least 1694, when
At the program's 50th anniversary, there was £32 billion in bonds — providing the government with capital at a cheaper rate than borrowing. Nearly 40 percent of
In America, banks can't run raffles or lotteries. They can run sweepstakes. The difference is a sweepstakes can't require entrants to put in money — people must be able to enter by simply sending in their names. That effectively kills the idea for banks.
D2D, which is short for Doorways to Dreams, works to change federal and state laws to allow banks to offer prize-linked savings. But it is also collaborating with institutions that can do this right now: credit unions. In some states, credit unions can hold raffles.
One was the
Communicating Arts' average deposit was between
''I knew that interest rates were not moving the dial in terms of whether people save or not,'' Hubbard said. ''If it's a half a percent on
The next year, Save to Win was born. Doorways to Dreams, the
For each deposit of
For last year's prize, the big check was divided into 10 regional prizes of
The project grew. It now has 34 credit unions involved, 12,000 accounts in total, with an average of
Save to Win was an immediate hit at Communicating Arts. An eighth of members signed up — about 800 people. And they saved, increasing their accounts by about
But then people dropped out — the 800 accounts fell to 500 or 600. ''People would put
Now Hubbard has started giving out fewer, larger prizes —
For the first four years of Save to Win in
This is in part a result of the recession. There are times in the economic cycle when financial institutions need more deposits, and a program like Save to Win would be highly profitable. The last few years have not been among those times. What banks and credit unions needed was more good loans — ways to make money on those deposits. They still need loans; credit unions nationwide are still sitting on 40 percent of their deposits, said Adams.
''This hasn't been embraced more broadly because it's being implemented at the worst time in depository institutions,'' said Adams. ''Despite that, credit unions see the merits for this type of program. It is part of their social mission to help people of modest means achieve their financial objectives.''
It may soon be possible to get even closer to the lottery. Doorways to Dream is developing a savings card (pdf) that can be sold right next to lottery tickets in the corner store. For
Putting lottery-style savings cards into corner stores in poor neighborhoods, where there are often no banks, could produce the large-scale consumer demand needed for big jackpots. In the meantime, Save to Win programs are spreading.
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This is an excerpt from Fixes, a series that looks at solutions to social problems, at nytimes.com/opinionator.
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