Premium ContentMouse over Home then click on Premium Content for information.Lee Briggs is enthusiastic about "Save to Win," a new Nebraska credit union program to encourage first-time savers by offering cash prizes for making deposits.
"It's a way for me to reinvent myself financially," said Briggs, a College of St. Mary student. "It gives you something to look forward to when you save. This keeps you intrigued."
Across the Missouri River, Iowa banks blocked a similar effort by credit unions, saying financial raffles send the wrong message to people struggling with money.
"I think there's a better way to encourage people to save," said Sharon Presnall, a lobbyist with the Iowa Bankers Association. "This just didn't square with our financial literacy efforts."
Nebraska credit unions' Save to Win program, which kicked off Friday, is modeled after one started in 2008 in Michigan. The idea stems from a study by the nonprofit Doorways to Dreams Fund of Roxbury, Mass., which found that many low-income people believe their best chance of reaching financial stability is winning the lottery — a much less certain route than regular savings.
To tap into that gaming philosophy, Save to Win accounts at nine Nebraska credit unions offer depositors chances of winning one $25,000 annual grand prize or dozens of smaller monthly prizes. In the first nine months of the program in Michigan, credit unions saw more than 11,000 of the accounts opened and nearly $9 million deposited, often by people with no other savings.
State Sens. Heath Mello and Jeremy Nordquist of Omaha and Amanda McGill of Lincoln heard about the concept at a legislative conference and brought the proposal to the Nebraska Legislature, which unanimously amended the state's lottery law last year to allow prize drawings connected to credit union savings.
Mello said the program could bring "dramatic results" by giving low-income people an extra incentive to conserve their money.
George Beatty, president of the Nebraska Bankers Association, said federal rules prohibit banks from such drawings, but the association didn't see a reason to oppose the credit union plan. Still, he said, connecting savings accounts with a raffle is "an odd combination."
Scott Sullivan, president of the Nebraska Credit Union League, which sponsors the program, said it's a "win-win" because depositors who don't win prizes still see their savings grow. Among the program's target groups are people who buy lottery tickets when they should be making savings deposits, he said.
Brochures for the program include a slogan reminiscent of scratch-card lotteries: "Savings barely scratching the surface?"
Some Nebraska groups that work with low-income people support the program. Ed Leahy, director of the Omaha Earned Income Tax Credit Coalition, said, "Savings is the key to wealth," and Save to Win offers a bonus: "It's fun. It's possible to get something extra."
Tina L. Gray, director of the educational Financial Success Program, explained Save to her program's participants and they all plan to open accounts. "This is a huge incentive," Gray said.
But Presnall, the Iowa bankers' lobbyist, said the bankers and Iowa credit unions are working on "a much better program to help people save money," also aimed at low-income savers.
"It's hard to square the idea that you're going to offer an account that pays a lesser amount of interest in order for the chance to win a prize, and encourage it to the exclusion of other, much better options for savers," she said. "We were concerned about the financial literacy component of encouraging people to make a financial decision that's not in their best interest because they have a chance of winning a prize.
"That just doesn't seem to be good financial advice for financial institutions to be making."
The program also doesn't disclose the odds of winning a prize, Presnall said, and the prize-linked accounts likely pay lower interest than other savings accounts.
Sullivan, from the Nebraska Credit Union League, said the odds of winning can't be determined until the credit unions know how many people will open the accounts and how much money they will deposit.
The Nebraska plan lets each credit union determine what interest rate to pay. Gallup Federal Credit Union's Save to Win certificates pay the same rate, currently 0.75 percent a year, as the credit union's regular 12-month certificate of deposit.
"We didn't want to put any disincentives to do the program," said credit union President Ronny Miller. But he said some credit unions may offer slightly lower rates to offset the costs of the program.
A proposal last year for Save to Win at Iowa credit unions had some support in the state's Legislature but eventually died because of the bankers' opposition, said Justin Hupfer, lobbyist for the Iowa Credit Union League. "We felt it was going to be pro-consumer legislation and (an incentive for) good behavior, but banks went out of their way to stop it."
Now Iowa credit unions and banks are considering taking part in Saveup.com, a national Internet-based system that rewards good financial steps like saving money and paying down debt with prizes that include cash, trips and electronics, Hupfer said.
Bank of the West and other banks are piloting the program. Hupfer said it's ironic that banks objected to Save to Win but some are now embracing a similar concept that banks also can use.
"It ends up with the same goal," he said. "We'll see how it turns out."
Briggs, the college student, said one of Save to Win's attractions is that the odds of winning a cash prize seem better than winning the lottery, "and you get a greater return on your investment. I'm going to start with $25 a month and go from there."
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