In March 2014 the aggregate personal savings rate, defined as the ratio of total savings to after tax income, was only 3.8%. A 2013 survey found that 27% of all Americans had no emergency savings, while another 23% had some but could not cover three months of living expenses. Low-income families struggle the most to accrue savings. (Source)
Prize-linked savings (PLS) accounts, an idea invented and incubated by credit unions, continue to gather steam nationally. The concept is to transition non-regular savers into regular savers. With as little as $25, a credit union member can open an account and enter a drawing for monthly and annual cash prizes. Some will win prize money, but those who do not will still benefit from having started an interest-generating savings account. Credit unions fund the program, thereby achieving the public policy goal of increasing savings with no cost to the state.
Across the country, states are passing legislation allowing credit unions to offer PLS accounts. In Pennsylvania, Representative Rosemary Brown (R-Monroe) introduced House Bill 2543, which will allow certain financial institutions to operate PLS programs. The Pennsylvania Credit Union Association (PCUA) supports this pro-consumer, pro-savings legislation.
Credit unions have played an integral role in developing PLS programs as part of their ongoing effort to help members enhance financial literacy, save money, and improve spending and debt management habits. We commend Representative Rosemary Brown for her efforts to be innovative in improving the financial well-being of Pennsylvania consumers.
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