Washington Credit Unions Exploring Prize-Linked Savings Opportunity

Most money consumers spend on lottery tickets is “flushed down the drain” and never seen again. But for members of eight credit unions in Michigan in 2009, every $25 they invested in a savings account stayed right there—and made them eligible for a $100,000 drawing.

Michigan’s “Save to Win” program is widely recognized as the model by credit unions and lawmakers considering establishing similar programs. Started with assistance from the Michigan Credit Union League, the Filene Research Institute and the Doorways to Dreams Fund, the program resulted in 11,000 new savings accounts with assets of $8.6 million in its pilot year.

“It turned non-savers into savers,” said Brandon Trenz of the Michigan league’s affiliated CU Solutions group. “It generated a lot more savings than even we anticipated.”

The program caught fire in Michigan after that first year and now involves 40 credit unions.

It also caught the eye of the Northwest Credit Union Association (NWCUA), which lobbied effectively to legalize the program in Washington.

“Americans haven’t developed good savings habits,” Association Senior Vice President of Policy & Public Advocacy Stacy Augustine said. “Prize-linked savings programs very effectively make savers out of folks who’ve never had long-term savings accounts. Just a small savings pool can be the one thing standing between a consumer’s financial health and financial disaster. As a result, this type of program can literally change people’s lives. It’s very compatible with the credit union emphasis on financial education and economic self-help.”

The Association found support from Senator Derek Kilmer, who said: “Our state took action on this quickly, because we saw the importance of helping folks prepare to weather financial ups and downs and enabling them to avoid taking on more costly debt.” He went on to emphasize that savings will play a role in America’s economic recovery.

Indeed, Michigan’s program now includes 16,000 enrolled savers who have socked away $28 million for emergencies, education and other needs. As their personal assets build, they’re eligible for each yearly $100,000 grand prize drawing in addition to monthly prize drawings valued at thousands of dollars.

“The phenomenal success of prize-linked savings in Michigan and elsewhere around the world demonstrates that consumers value a product that mixes fun and excitement with saving, said Timothy Flacke, executive director of the Doorways to Dreams (D2D) Fund. “Doorways to Dreams Fund is delighted Washington may be among the first states to expand this product in the U.S.”

Doorways to Dreams and Michigan’s CU Solutions have offered to administer a prize-linked savings program in the northwest, helping interested credit unions establish the rules, organize the prize pool and facilitate drawings.

The NWCUA has scheduled an Idea Exchange program during its Convention and Annual Business Meeting. The session is scheduled to begin at noon on Sept. 21. The Idea Exchange will provide additional information and collaborative opportunities for credit unions considering prize-linked savings programs.

First in line may well be Seattle-based Express Credit Union.

“With prize-linked savings, there are no losers!” Managing Director Dave Sieminski said. “At Express Credit Union, we are very excited to implement prize-linked savings, because we believe it will add an element of fun and an additional incentive to encourage saving among our many low-income members.”

The Washington Asset Builders Coalition (WABC) has also stepped up. Rebeca Potasnik pointed out that the WABC is already uniting under-banked consumers with credit union programs that improve their financial literacy.

“We’ve been working alongside NWCUA, because prize-linked savings dovetails into our work advancing the financial capacities of lower-income people,” she said. “With presence in nearly every corner of the state, our members would offer a unique external marketing opportunity.”

Sieminski and Potasnik will join a Doorways to Dreams representative in facilitating the Idea Exchange meeting at Convention. Oregon credit union representatives are also invited to the Idea Exchange to get an early look at the program that the NWCUA will lobby for on their behalf.

If the lobbying efforts in Oregon follow Washington’s example, the results will be favorable.

“By far, our prize-linked savings legislation was the most talked-about bill we’ve had in years,” said Mark Minickiello, NWCUA VP of Legislative Affairs. “Legislators were excited about the possibilities of getting non-savers to start saving and hopefully help them avoid the financial pitfalls many get into when they need emergency funds. This was a bill where I would get stopped in the hallway or asked about in the elevator. I think credit unions have a unique opportunity here.”

 

Questions or Concerns? Contact the Anthem Editor: Editor@nwcua.org.

Posted in Advocacy News, NWCUA.