Another No-Lose Lottery

Last week, Michigan’s Save-to-Win program, the sort of “no-lose lottery” we discussed in a twopart podcast, announced its second winner. Charmain Hanners of Alpena Alcona Area Credit Union is this year’s lucky winner of $100,000. The “no-lose lottery,” a savings program with a lottery element, was brought to the U.S. by Harvard Business School professor Peter Tufano, who will soon become the new dean at the Saïd Business School, University of Oxford. The Save to Win program racked up $28 million of savings as of the end of 2010 (research can be found on Tufano’s non-profit’s website). And now there’s one more “no-lose lottery” in America: if you live in Alabama, the Save Now Win Later program offers up a $20,000 savings bond prize for putting money into the bank.


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  1. Brad says:

    Great to see Huntsville AL is promoting savings as well!

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  2. Rob says:

    We’ve had these in the UK since 1956. They are called premium bonds.

    And it isn’t true to say they are ‘no lose’. Whilst the capital is not at stake in nominal terms it is in real terms because you may ‘lose’ interest you could have earnt elsewhere.

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  3. Ian Kemmish says:

    What happens after the prize drawing? If you believe that bribery is the only way to make people save and the bribe later goes away, then surely you have to believe that those people will withdraw all their savings and binge on something?

    Heavens, they might even decide that not winning the grand prize is the kind of loss that humans are “averse” to and refuse to participate in any future programs designed to encourage savings.

    Rich pickings for the Law of Unintended Consequences….

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  4. Nick Coghlan says:

    @Rob: anyone financially savvy enough to be worried about opportunity cost isn’t going to be considering a PLS as an alternative to buying a lottery ticket.

    @Ian: they wait for the next prize drawing, just like they do when they buy their next lottery ticket. A PLS pools some of the interest from all of the saving accounts involved and awards it as prizes rather than giving it to the individual accounts. The “small chance of a big win” serves as a better incentive for some people than the “near certainty of a small win” offered by a regular savings account.

    There’s a good explanation in the article linked from the “part” in “two-part”.

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  5. Michael Radosevich says:

    I’m old enough to remember when lotteries were illegal throughout the US. And lotteries should be made illegal again – gambling is stupid behavior, and sometimes government has to protect people against stupid behavior.

    We have laws requiring safety belts and bike helmets. We have laws preventing people from selling their organs. We need to reinstate the laws that made all gambling illegal, and extend the laws’ reach to Nevada.

    If people want to gamble, let them gamble with these savings lotteries. These are, in fact, “no loss” lotteries, and no other sort of lottery or gambling should be legal.

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  6. Kirk says:

    2 questions? Did it bring in unbanked cash and or did net savings actually increase for the participants?

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  7. Spooner says:

    This may encourage savings, but it also encourages gullibility and stupidity. Instead of “no lose”, a more honest name would be “almost certain to lose”, the loss, of course, coming in the form of reduced interest. Combining a lottery with a savings account is mere financial obfuscation.

    But maybe the stupidest people of all are the Harvard Business School academics who waste their time dreaming up ways to get people to do what they don’t want to do. I’m guessing that they do this because they think they know what’s good for others.

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  8. EMILY says:

    I say that the majority of Americans that are actually qualified for this “lottery” would not be interested in putting away $50 per entry away in a bond.
    1. The return on this is fairly low.
    2. Families with children making <$50,000/year collectivly seem to (don’t want to be presumptuous) not be thinking of investing. While investing and saving are very valuable, very few people understand that money needs time and time and money many do not have. MORE MONEY MAKES MONEY. America seeks out instant gratification, lottery tickets from the local corner store becomes more appealing than a government lottery with very little gain short term.

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