Thursday, March 29, 2012

Betting for Retirement

This week's $540 million dollar Mega Million jackpot is the biggest of any lottery in history. I just played Mega Millions. I played more out of fear than hope. I love to teach, and if I win the lottery I will continue to teach. However, most of the teachers pulled together to buy tickets for this weekend's drawing and I am afraid of being the only teacher in the school that does not win. My contribution was budgeted as an entertainment expense, but I have to wonder how many people are playing to bet for their retirement?

According to the Cleveland Federal Reserve, our national personal savings rate spent most of the decade below 4%. In a recent survey, one in four Bankrate survey respondents reported having zero emergency savings. Yet, in 2010 we spent $58 billion dollars playing the lottery. Although these numbers are concerning, there is a service some states use that mitigate the consequences of gambling and create a habit of savings.

Prize-linked savings programs (PLS) allow savings account holders the opportunity to win prizes or cash. Think of it as a lottery program that does not take your money. The winnings are not as lucrative, but the mechanics of the program reward appropriate savings behavior. D2D piloted a successful PLS program, which you can read about here. PLS programs need to be broadly provided to reinforce and reward responsible consumer behavior.

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