Kilmer Prize-Linked Savings Initiative Highlighted as Innovative Idea by National Nonprofit Organization
WASHINGTON, D.C. – A national nonprofit organization named prize-linked savings accounts backed by Representative Derek Kilmer (WA-06) a “top impact innovation” as part of their 10-year anniversary. The Center for Financial Services Innovation (CFSI) highlighted these savings accounts as one the best ways to encourage workers and families to save more by offering rewards for savings.
Rep. Kilmer introduced a bipartisan bill last October with Representative Tom Cotton (AR-04), the American Savings Promotion Act, which seeks to help reverse a decline in Americans’ personal savings rates by allowing more financial institutions to offer prize-linked savings accounts. Senators Jerry Moran (R-Kan.) and Sherrod Brown (D-Ohio) introduced companion legislation in the Senate.
Prize-linked savings accounts are typical savings products that offer participants the chance to win prizes. The more participants save, the more chances they have to win prizes. Consequently, those saving are also strengthening their safety net and preparing themselves to meet future financial needs. Money in the account is never at risk – so even if someone does not win a prize, they still maintain all of their savings.
“More people are taking notice of research showing that if folks have the chance to win a prize for saving money, they are more likely to save for rainy days,” said Kilmer. “Today, many Americans aren’t saving enough to be prepared for what life can throw at them – a lost job, a medical emergency, or even a broken water heater. Whether someone is buying a house or figuring out how to pay for school, it can be valuable to have the savings to get closer to that goal. This is a great way to make that happen. The best thing that can happen is you win significant financial prizes. The worst thing that can happen is that you’ve saved money.”
“Savings is a key component of an American’s overall financial health, but we know it is something millions of consumers struggle with,” said Jennifer Tescher, President & CEO, CFSI. “Taking advantage of behavioral insights has helped improve the design and delivery of financial products and has resulted in Americans saving hundreds of millions of dollars as a result. This is a win for Americans and for financial services providers.”
“We are thrilled to see prize-linked savings highlighted as an important and game-changing innovation as we know through our work that the product has significantly helped Americans improve their financial security,” said Joanna Smith-Ramani, Director of Scale Strategies, Doorways to Dreams Fund. “It takes consistent effort from both government and the financial services industry to create lasting change and we applaud the leadership Representative Kilmer has shown for years on this issue.”
The Center for Financial Services Innovation works to develop and evaluate products to create a financial services marketplace that meets the needs of all American consumers. To do this, they lead a network of financial services innovators, including retail banks, credit unions, credit bureaus, payment networks, non-bank financial institutions, fintech start-ups, and research partners at universities.
Representative Kilmer previously sponsored and passed legislation in the Washington Senate to bring prize-linked savings accounts to Washington State. Currently, eight states including Washington have passed legislation allowing financial institutions to offer these regulated products. However, due to outdated federal regulations, banks and federally chartered financial institutions are unable to offer prize-linked savings accounts. The American Savings Promotion Act would remove this regulatory barrier and ensure more consumers can access these safe financial products, without creating a new government program or spending federal resources.
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