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WASHINGTON, D.C. – Today, U.S. Senators Jerry Moran (R-Kan.) and Sherrod Brown (D-Ohio), members of the Senate Economic Mobility Caucus, introduced the American Savings Promotion Act – legislation to allow the creation of prize-linked savings accounts (PLS). At a time when the annual savings rate in the United States is just 4.1 percent, PLS accounts would incentivize personal savings by offering participants chances to win prizes based on savings account deposit activity while never putting their savings at risk.

"Prize-linked accounts are proven to increase savings-rates, which empower individuals to better endure financial strain and climb the economic ladder,"Sen. Moran said. "By encouraging personal saving, PLS accounts keep money in the hands of families who need it most. While this innovative tool would offer the chance of big winnings, its real value is the promise of increased financial security for all Americans."

"The American Savings Promotion Act is an exciting and innovative way for American families to begin building a secure financial future,"Sen. Brown said. "Too many families in Ohio and across the nation are living paycheck-to-paycheck. Rewarding Ohio families for saving will help them begin building long-term financial security and a cushion for hard times. This is a common-sense approach to promoting savings and I am proud to work with Sen. Moran to get this passed."

Prize-linked saving has been identified as an attractive way to incentivize saving by a broad range academics and financial policy professionals:

  • In a 2011 Financial Times op-ed, former Obama OMB Director Peter Orszag advocated for PLS: “In the coming decade, we need a comprehensive effort to raise household savings. As part of that push, let’s give savings accounts linked to lotteries a chance.”
  • Stuart Butler of the Heritage Foundation and author of Boosting Economic Savings Through Prize-Linked Savings: “The dearth of savings in America, particularly among lower-income Americans, is a major obstacle to upward mobility and achieving the American Dream. The creative idea of prize-linked savings has proved to be very successful in boosting savings, but red tape blocks federally chartered financial institutions from offering these pro-savings products.”
  • Tim Flacke, Executive Director of D2D Fund: “Based on our last five years of work on prize-linked savings, we believe this is a proven and promising innovation to help engage Americans to save. We applaud the leadership of Senators Moran and Brown to help expand PLS through this bill so that more Americans can experience a fun and successful way to save.”

The Pew Foundation’s Economic Mobility Project found that 71 percent of children born to high-saving but low-income parents emerge from the bottom income quintile in one generation, compared to only 50 percent of children from non-saving low-income households. While more than 40 percent of American households lack the savings to cover basic expenses for 3 months, Americans spend nearly $61 billion on lottery tickets each year.

PLS products have great promise, but a broadly-written 1960s law banning banks from operating lotteries unintentionally precludes banks and thrifts from offering PLS products. More than half a dozen states have changed applicable state laws to allow credit unions within their borders to offer PLS products, but federal law limits the expansion of this savings-enhancing tool to other financial institutions.

The American Savings Promotion Act would promote savings by creating a narrow exemption for PLS products while maintaining the ban on federally-insured financial institutions from operating lotteries. By removing federal barriers to banks and thrifts offering PLS products, the American Savings Promotion Act clears the way for states to enable all interested financial institutions in their jurisdiction to offer PLS products.

Companion legislation is being introduced today in the House of Representatives by Rep. Derek Kilmer (D-Wash.) and Rep. Tom Cotton (R-Ark.)

Click below to read a one-page summary of the American Savings Promotion Act.



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