Savings and Prize-Linked Savings Accounts

32 Pages Posted: 20 Oct 2012

See all articles by Kadir Atalay

Kadir Atalay

The University of Sydney

Fayzan Bakhtiar

affiliation not provided to SSRN

Stephen L. Cheung

The University of Sydney; IZA Institute of Labor Economics

Robert Slonim

The University of Sydney; IZA Institute of Labor Economics

Abstract

Many households have insufficient savings to handle moderate and routine consumption shocks. Many of these financially fragile households also have the highest lottery expenditures as a proportion of income. This combination suggests that Prize-Linked Savings (PLS) accounts, that combine principal-security with lottery-type jackpots, can increase savings among these at-risk households. Results from an online experiment show that the introduction of PLS accounts increase total savings and reduce lottery expenditures significantly, especially among individuals with the lowest levels of savings and income. The results imply that PLS accounts offer a plausible market-based solution to nudge individuals to increase savings.

Keywords: savings, individual decision making, personal finance, lotteries, experimental economics

JEL Classification: E21, D14, C91, L83, D12

Suggested Citation

Atalay, Kadir and Bakhtiar, Fayzan and Cheung, Stephen L. and Slonim, Robert, Savings and Prize-Linked Savings Accounts. IZA Discussion Paper No. 6927. Available at SSRN: https://ssrn.com/abstract=2164656

Kadir Atalay (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Fayzan Bakhtiar

affiliation not provided to SSRN

No Address Available

Stephen L. Cheung

The University of Sydney ( email )

School of Economics
Social Sciences Building A02
Sydney, NSW 2006
Australia
+61 2 9351 2135 (Phone)
+61 2 9351 4341 (Fax)

HOME PAGE: http://https://sydney.edu.au/arts/economics/staff/profiles/stephen.cheung.php

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Robert Slonim

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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