Favorite

Playing to win 

When people think the lottery is their only way out of poverty, it says more about the desperate lack of financial security-building options in the United States than it does about the players' lack of judgment.

A surprising number of low-income Americans — 38 percent — see the lottery as their best shot at achieving significant wealth, according to a 2006 survey by the Consumer Federation of America. It's easy to respond with derision to such attitudes. But when people think the lottery is their only way out of poverty, it says more about the desperate lack of financial security-building options in the United States than it does about the players' lack of judgment.

Arkansas's newest poverty-fighting tool, which looks like a combination between a Powerball ticket and a savings account, could change that. This new "prize-linked savings" option is open to anyone. If you save a little cash (and don't withdraw it), you are entered to win a prize. If you don't win, you still get to keep all of your money. Some call it a "no-lose lottery," and it has been a game changer for low-income families in states like Michigan and Nebraska. In both places, the vast majority of participants had never saved before, lived on modest incomes, or were asset poor. Nonetheless, participants' average year-end savings balance was over $2,000 and more than 90 percent continued their savings habits into the next year.

One successful, multistate prize-linked savings product called "Save to Win" allows credit union members to open yearlong share certificates for just $25. During that year, participants can't make withdrawals, but they can make as many deposits as they like. Every $25 deposit (with a limit of 10 per month) earns another entry into the raffle for prizes, which are awarded randomly every month and every quarter and which range from $25 to $5,000. Save to Win happens to use credit unions, but Arkansas banks can hold similar raffles. Banks and credit unions benefit by attracting new customers and can offset the cost of prizes by offering lower interest rates than normal savings accounts or acquiring grants.

As of 2014, over $115 million has been saved nationally in prize-linked accounts, with most of the participants being financially vulnerable families. In a 2015 study by the nonprofit Doorways to Dreams Fund, a 35-year-old police officer with a prize-linked savings account said, "I'm doing so much better. I have an emergency fund, I'm paying down my debt. ... It's changed how I feel about my future." These accounts are life changing: Because they are fun, they get people excited about building healthy savings habits. For a family living on a razor-thin budget, that financial cushion could mean being able to afford a major car repair, getting through a week without a paycheck, or finally catching up on household debts.

Without any guidance, building up cash for a rainy day is especially hard for many Arkansans, who are less likely to have a savings account than are residents of any other state, according to the Corporation for Enterprise Development. Despite a historic drop in unemployment, our jobs still pay too little: The Arkansas median hourly wage was about $1 behind Louisiana, Oklahoma and Texas in 2014. Job outlooks are even worse for minorities. If you are an African-American resident of Arkansas, you can expect to make about $4 an hour less than your white neighbors.

We make these problems worse by cutting taxes for everyone except the least well-off. A $100 million tax cut package in 2015 completely left out the bottom 20 percent of workers. Legislators also have repeatedly shot down an asset-building tool called the Earned Income Tax Credit that would help working families; Arkansas is still among the few states that don't have such a tax credit at the state level. Even gains from the economic recovery have gone almost exclusively to the wealthy — the bottom fifth of Arkansas workers are stuck with the same wages they had in 2009, while the top fifth have enjoyed a 2.4 percent bump in income. All of these factors combine to make prize-linked savings a unique opportunity to change the asset poverty landscape in Arkansas.

Unlike traditional lottery programs, prize-linked savings accounts entail no direct state involvement, but legislation is required to get around legal restrictions on gambling. In 2014, the American Savings Promotion Act cleared federal barriers to prize-linked savings programs, and in 2015 Arkansas passed a bill allowing our banking institutions to participate. However, it is up to banks and credit unions to get the ball rolling, and only a handful in Arkansas have so far taken the initiative on prize-linked savings programs. This innovative tool can't work unless we get the conversation started.

Eleanor Wheeler is a senior policy analyst for Arkansas Advocates for Children and Families.

Favorite

From the ArkTimes store

Comments

Subscribe to this thread:

Add a comment

More by Ellie Wheeler

  • No relief for renters

    If you are hoping to see new laws that improve rights for people who rent homes or apartments in Arkansas, you will find disappointing two bills proposed so far this legislative session — SB 25, by Sen. Blake Johnson (R-Corning), and HB 1166, by Rep. Laurie Rushing (R-Hot Springs). Even if both bills become statute, Arkansas would still have the worst landlord tenant laws in the country.
    • Feb 2, 2017
  • Let them eat cake

    An unproductive and harmful bill attempting to curb obesity passed easily out of committee last week at the state legislature. House Bill 1035 attempts to address this serious public health issue by preventing poor families who rely on SNAP (the federal Supplemental Nutrition Assistance Program, formerly called food stamps) from purchasing certain items such as candy and sodas.
    • Jan 26, 2017
  • Help all veterans

    Veteran-specific bills often miss the mark on helping the most sympathetic military families by focusing on retirement income.
    • Dec 22, 2016
  • More »

Readers also liked…

  • Schlafly's influence

    Phyllis Schlafly, mother, attorney and longtime antifeminist, died recently. What Schlafly promoted was not novel or new. Men had been saying that men and women were not equal for years. However, anti-feminism, anti-women language had much more power coming from a woman who professed to be looking out for the good of all women and families.
    • Sep 15, 2016
  • Seven

    The controversy over the Ten Commandments monument on the Capitol lawn just won't go away.
    • Feb 9, 2017
  • Why a change of leadership at the LRSD now?

    Johnny Key's abrupt, unilateral decision to not renew Baker Kurrus' contract as superintendent strikes us as shortsighted, misguided and detrimental to the education of our children and the health of our community.
    • Apr 21, 2016

Most Shared

  • Former state board of education chair Sam Ledbetter weighs in on Little Rock millage vote

    Ledbetter, the former state Board of Education chair who cast the decisive vote in 2015 to take over the LRSD, writes that Education Commissioner Johnny Key "has shown time and again that he is out of touch with our community and the needs of the district." However, Ledbetter supports the May 9 vote as a positive for the district's students and staff.
  • Workers stiffed

    How is it going with the great experiment to make the Republican Party the champion of the sons and daughters of toil instead of the oligarchs of wealth and business?
  • O'Reilly's fall

    Whom the gods would destroy, they first make TV stars.

Latest in Guest Writer

  • Intracity tourism

    The issues that tug at my heartstrings are neighborhood stigma and neighborhood segregation, which are so prevalent in Little Rock. In my opinion, the solution to those problems is "intracity tourism."
    • Apr 27, 2017
  • Not justice

    The strongest, most enduring calls for the death penalty come from those who feel deeply the moral righteousness of "eye-for-an-eye" justice, or retribution. From the depths of pain and the heights of moral offense comes the cry, "The suffering you cause is the suffering you shall receive!" From the true moral insight that punishment should fit the crime, cool logic concludes, "Killers should be killed." Yet I say: retribution yes; death penalty no.
    • Apr 20, 2017
  • Hutchinson's Pinto moment

    The Ford Motor Co. brought the Pinto to America's highways, even though it knew the car had serious safety problems. Indeed, Pinto after Pinto burst into flames in rear-end collisions, causing severe injuries and deaths. Ford's lack of moral and economic judgment brought shame to the company's brand for decades.
    • Apr 6, 2017
  • More »

Visit Arkansas

Fishing the Diamond Lakes of Arkansas

Fishing the Diamond Lakes of Arkansas

Arkansas angler and fishing expert Billy Murray shares his extensive knowledge of the Diamond Lakes of Arkansas

Event Calendar

« »

April

S M T W T F S
  1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30  

Most Viewed

  • Forget the hairdo

    As the 2018 races begin to heat up, we see more and more women running for office. And as more women run, we will see more of the seemingly endless critiques of their appearances.
  • O'Reilly's fall

    Whom the gods would destroy, they first make TV stars.
  • Intracity tourism

    The issues that tug at my heartstrings are neighborhood stigma and neighborhood segregation, which are so prevalent in Little Rock. In my opinion, the solution to those problems is "intracity tourism."

Most Recent Comments

  • Re: O'Reilly's fall

    • O'Reilly should run for president. He's already cleared one major hurdle by proving he's a…

    • on April 27, 2017
  • Re: Intracity tourism

    • I love being a tourist in my own backyard. One of the advantages of being…

    • on April 27, 2017
 

© 2017 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation