Introducing prize-based savings to the US
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Matthew Bishop is tweeting from the Global Financial Literacy Summit in Washington today, featuring not only Ben Bernanke but also Sheila Bair. This is particularly intriguing to me:
FDIC chair Sheila Bair is looking at creating ‘prize-based savings’ to turn some of the money people spend on lottery tickets into savings.
Prize-based savings, such as the UK’s premium bonds, make a lot of sense: they’re particularly good at appealing to segments of the population who have no savings plan currently and who are heavy lottery players. But they also tend to run straight into legal obstacles: South Africa’s million-a-month account, for instance, was closed down last year on the grounds that it contravened the National Lotteries Act.
If prize-based savings are currently illegal in the US — and they almost certainly are — then it makes a lot of sense to use the new financial regulation legislation to make them legitimate. Maybe the birth of the Consumer Financial Protection Agency is the perfect opportunity to regulate such things effectively.
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I’m glad to hear that someone is thinking about incentives in a rational manner. Take another arena: voting. Imagine how many more people would vote if a ballot was also a ticket for a prize.