A prize-linked savings account pays little or no guaranteed interest. Instead, every dollar deposited earns a chance at a real cash prize, sized to how much is saved, drawn on a schedule. Whether or not a saver wins anything, the deposit itself is never at risk: they keep every dollar they put in. It sounds like a gimmick. It has moved real money into real savings accounts at real scale, been studied in a real lab, and run continuously in one country for almost seventy years. This is the mechanism, the evidence, and the honest catch.
The story in five parts
The prize is randomised. The principal isn't. Losing the drawing still means keeping every dollar deposited.
Michigan credit unions tried it in 2009. Non-savers opened accounts by the thousands.
Given the identical expected payout, more people chose the lottery-style option and waited for it.
Premium Bonds pay no interest at all, only prizes, and it's one of the country's largest savings products.
The honest question every prize-linked product has to answer, and the one Michigan's own evaluation actually checked.
A prize-linked savings (PLS) account replaces some or all of a normal savings account's guaranteed interest with a chance at a real cash prize. The size of that chance scales with how much is saved, more deposited means more entries, but the entries themselves are what's randomised, never the deposit. People reliably overweight a small chance at a large prize relative to its actual expected value, the same tendency that makes ordinary lotteries profitable for the house. A prize-linked account borrows that same pull, but removes the part of a normal lottery that makes it a bad trade: the money staked.
Only the prize is a bet. The money that earned the chance at it was never part of the wager.
The idea isn't hypothetical. It has run at meaningful scale in two very different regulatory environments, a US credit union pilot barely fifteen years old, and a UK government savings bond older than the internet.
Could a chance at $5,000 get non-savers to open a savings account at all?
In 2009, a group of Michigan credit unions partnered with the D2D Fund (Doorways to Dreams) to launch Save to Win: a savings account where every $25 deposited earns one entry into monthly and annual prize drawings, capped at 10 entries a month, with prizes ranging from $25 up to $5,000.
By the end of its first year, the programme had opened 11,666 new accounts and drawn in $8.56 million in savings, an average of $734 per depositor. North Carolina and Washington adopted their own versions by 2013, and Save to Win is now offered through more than 100 credit unions nationwide.
What it teaches: reframing part of a savings account's return as a lottery-style prize, instead of a slightly higher guaranteed rate, moved real deposits at real scale, including from people the program's own evaluation found were otherwise non-savers.
What does the same idea look like after almost seventy years and full government backing?
NS&I, the UK's state-backed savings institution, has run Premium Bonds continuously since 1956. Bonds pay no interest at all: every £1 bond is entered into a monthly prize draw funded by a pool equivalent to a modest annual rate, with prizes from £25 up to £1 million, and the full amount put in remains withdrawable at any time.
The product now holds tens of billions of pounds across millions of savers, making it one of the largest personal savings products in the country, run without interruption for nearly seven decades under direct government backing.
What it teaches: removing the guaranteed return entirely, not just adding a lottery on top of one, is popular and durable at a genuinely massive scale, once the principal itself is fully guaranteed by a credible institution.
Real-world adoption numbers show people opened these accounts. They don't, on their own, prove the lottery structure is what did it, rather than the marketing, the credit union relationship, or something else entirely. A controlled lab experiment isolated the mechanism directly.
The lottery-style option got more people to wait. Even though both options paid identically on average, framing the deferred payment as a prize draw, rather than a guaranteed sum, increased how often participants chose to defer. The pull was strongest among men, self-reported lottery players, and participants with the lowest bank balances, exactly the group a standard interest rate struggles hardest to reach.
The most common worry about prize-linked savings is substitution: does the product create genuinely new saving, or does it just pull money out of an ordinary savings account and into this one, with no real change in how much anyone actually put aside?
The Save to Win research checked this directly, not just deposit totals, and found the programme disproportionately reached non-savers, lower-income households, and people with little or no existing emergency savings, exactly the group substitution would be least likely to explain. That's a genuinely reassuring finding, and it's specific to that programme; a prize-linked product introduced elsewhere would need the same check, not an assumption that the Michigan result automatically transfers.
A second, quieter catch sits underneath the first. A pure prize-linked structure with no guaranteed rate at all, the Premium Bonds model, still lets inflation erode the real value of money sitting in the account, even though the nominal deposit is never at risk. “You can't lose your deposit” and “your money doesn't lose value” are two different promises, and only the first one is actually being made.
There's also a design line worth watching in any product built this way: the lottery framing only works honestly if the underlying account still meets ordinary savings needs, easy withdrawal, no lock-in beyond what a normal account would require, sitting on top of a fair product, not replacing one.