Kilmer’s ‘Save to Win’ bill passes House test

In the not-too-distant future your bank might begin offering you an opportunity to win a few bucks, or a few thousand. You will be getting those chances just by saving money, something nearly anyone who has ever even heard of money will tell you that you should be doing anyway.

U.S. Reps. Derek Kilmer, D-Gig Harbor, and Tom Cotton, R-Ark., introduced the ‘Save to Win’ legislation nearly a year ago. On Monday it passed the House by voice vote. A companion bill awaits consideration in the Senate.

The basic idea is this: The more you deposit into savings the higher chance you get of winning a nice monthly prize and a significant annual prize. In Washington the monthly prize might be $50. The annual prize was $5,000 in 2013. And if you don’t win, you still keep the money you put into your savings account.

Arla Shephard detailed what’s happening in the state for the Kitsap Sun in April. One of the selling points of the program is it’s a lottery you can’t lose. You’re not going to collect $149 million, but let’s get real. Unless you are beyond astronomically lucky, you’re not going to get that by plunking down $2 for a Powerball ticket either. I’m not trying to dissuade you from playing the regular lottery, but it’s no secret that the most likely outcome from playing most lottery games is you pay $2 to hope for something miraculous. In some cases, it’s worth it.

Federally chartered financial institutions cannot offer a savings lottery now. In four states, including Washington, locally chartered credit unions can. Connection Credit Union of Silverdale and Peninsula Credit Union of Shelton participate. The other participants are Express, Fibre Federal, North Coast and TwinStar.

The idea has lots of support and the voice vote in the House suggests there isn’t a lot of opposition from politicians. But some will ask why isn’t saving its own reward. Why do we have to use a modified gambling mechanism to get people to save?

There is one study that shows having a system like a prize-linked savings account not only increases savings, some of the money low-income people invest in savings accounts comes from funds they used to use to buy lottery tickets. So in some cases people stop playing the lottery they almost can’t win in exchange for the one they almost can’t lose.

“Almost” in the second use is not an accident. One of the reasons some people speculate people don’t save more is because the interest rates are so bad that a dollar invested today is often worth less next year. But if you need $2,000 and the only option you have available to you is charging it on a credit card, that dollar becomes worth more. If you have it in savings and can use it in emergencies, you won’t lose 18 percent interest by plunking down plastic.

Others worry that as interest rates on borrowing start to go up again financial institutions will resist increasing rates on savings, opting to market their “prizes,” instead. That might be true. We won’t know until that day we’ve been saying for more than a decade is inevitable actually arrives. Either way, if the prizes increase savings, then that means less spending on credit. It could also prevent some people from having to move into their cars.

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