"To encourage savings, Mass. should allow banks to offer lotteries" February 08, 2015
One of the most promising strategies to combat poverty isn’t legal in Massachusetts. That should change this year, if the Legislature and Governor Charlie Baker approve a proposal by Pittsfield State Senator Benjamin Downing that would allow Massachusetts banks and credit unions to conduct savings lotteries, an innovative approach that offers random cash prizes for savers and has been proven to help low- and middle-income consumers build savings.
Right now, the lack of adequate personal savings compounds the effects of poverty, and neither the government nor the private sector have had much luck inducing poor people to save more.
Think about that for a moment. If your poor....
According to a Jan. 29 Pew report,
the average low-income American has only about nine days of cash
reserves. The lack of even a small cushion heightens instability and
reduces the ability to weather ups and downs.
At the same time, research has shown that lottery tickets are consistently more popular in low-income communities, and state statistics compiled by the Globe last year back up that finding:
What a surprise, the Globe touting its own reporting.
It’s easy for the middle class to scoff at such choices, but as economists have pointed out, from the options available to a low-income consumer, lottery tickets can seem like the least bad investment strategy.
What middle class?
Anyone playing the lottery is likely to lose over time, but winning carries a significant, potentially vast, upside. On the other hand, investors would need to have a lot more principal before existing private-sector incentives for savings — for example, the meager interest payments banks now offer on deposits — or the government’s tax incentives for savers start to feel at all meaningful. More sophisticated investments, with their fees and high minimum deposits, are even farther out of reach.
Related: Banks Love You
Prize-linked savings, which have been used overseas and in several
states, combine the windfall potential of lotteries with conventional
savings accounts. As with savings accounts, accountholders keep the
principal they deposit. But their deposits don’t earn interest
individually. Instead, the interest from all the prize-linked accounts
is pooled together, and then paid out in a lump sum to a randomly
selected winner or winners from among the account holders.
I don't like that at all. You collect more interest than the next guy, and yet he gets all the money?
The jackpot
can be significant: In the United Kingdom, where the government runs a similar system,
payouts reach as much as 1 million pounds. Accountholders get the
allure of potential jackpots, but also build a savings account. A program in Michigan
showed that prize-linked savings at credit unions brought many
nonsavers into the financial system for first time, and while they could
have withdrawn their savings at any time, many did not.
This is ALL ABOUT BANKS GETTING MORE of YOUR MONEY!
I'm not saying savings are not important, but since when has the banker's propaganda pre$$ cared about you other than being an ATM machine?
Most states bar such savings lotteries, though, and until January the federal government did, too. But President Obama signed bipartisan legislation removing federal obstacles
to savings lotteries, leaving it up to states. Ten had already passed
legislation allowing them at credit unions. Since a Massachusetts
nonprofit, the D2D
Fund, has been a prime force behind the idea, it would be only fitting
for Massachusetts to become the next to act on savings lotteries — and
to jump into the lead by clearing the way for both banks and credit
unions to offer them.
OMG!!!!!
"Nonprofits provide new ways for corporations and individuals to influence," -- as if they didn't have enough influence already!
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Maybe you are interested in this next agenda-pu$hing piece:
"Mass. lottery should embrace games that encourage savings" February 09, 2015
The Massachusetts Lottery has thousands of sales agents, concentrated especially in low-income neighborhoods where the games are most popular. Those are often the same corners of the state where banks don’t have branch offices, faith in the financial system is limited, and personal savings rates are low. With its robust network and trusted reputation, the lottery could help bolster savings if it expanded its mission. Treasurer Deb Goldberg could do that by directing the lottery to turn its expertise to supporting a new approach to alleviating poverty.
Massachusetts has the nation’s best lottery, delivering about $1 billion in local aid funds annually
that form a crucial revenue stream for municipalities, while keeping
administrative costs far lower than in most states. Yet those profits
still come at a cost that makes liberals and conservatives alike
uncomfortable: the system is starkly regressive, with money coming
disproportionately from poor people. Goldberg’s hometown of Brookline,
for instance, has 23 lottery agents, and residents spent an average of $181 on lottery tickets in 2013; Revere, with a smaller and poorer population, has 64 agents, and residents spent $907.
A proposal to legalize prize-linked savings, under consideration on
Beacon Hill, would apply to banks and credit unions, allowing them to
offer savings lotteries that have been shown to increase savings among
low and middle-income consumers. But the Boston-based nonprofit that has
advocated the idea in the United States, the D2D Fund, is hoping for an
even more powerful partner: It is seeking to sign up a state lottery
system to experiment with its own prize-linked savings scheme. If
prize-linked lotteries are legalized, then Massachusetts, with its
highly regarded lottery and progressive leadership, should step up.
The
group’s vision is for a state to offer “savings tickets,” which would
look and feel just like lottery tickets, and be sold at corner stores
and gas stations alongside normal lottery products. Savings tickets
would appeal to the same reward calculus as a lottery ticket: Players
are unlikely to win, but if they do, the windfall might be huge. The
difference is that players don’t lose the money they spend on the
ticket: It retains its underlying value, which players can then add,
with a smartphone or phone call, to an account established with the
state. Lotteries in many states, including Massachusetts, already
operate second-chance drawings
in some games, meaning the concept of reusing tickets isn’t completely
foreign. The administrative costs and prizes would come from pooled
interest on the accounts.
Looking like and sold alongside lottery
tickets, but without the same profits for the state, savings tickets
could be considered a competitor to existing, highly profitable games.
That’s not guaranteed to be the case. Experience in other countries
suggests prize-linked savings can complement a lottery. In the United
Kingdom, the national lottery and a savings-linked lottery program
called Premium Bonds, which offers prizes of up to 1 million pounds,
co-exist.
But even if a prize-linked savings lottery damaged the state
lottery’s bottom line, that’s still a risk that the state should be
willing to take. There is precedent in the treasurer’s office for
accepting less than maximum returns in exchange for supporting other
social objectives. Goldberg’s predecessor, Steve Grossman, began a popular program
that put some of the state’s reserves in local banks. The initiative
kept state money in Massachusetts, where those banks could lend and help
the economy, but wasn’t strictly speaking a profit-maximizing move. Yet
it has been widely hailed, including by Goldberg. If the treasurer can
risk a slightly lower return to help local banks, she can surely accept a
less profitable lottery game that might help low-income residents of
the Commonwealth build savings.
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