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Prize-Linked Savings: Balancing Near-Term Gains with Longer-Term Consequences Open Access

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Many Americans have little or no savings set aside to help them weather income and consumption shocks. Prize-linked savings (PLS) – an innovative personal finance tool in which returns to saving are meted out as raffle prizes rather than interest – aims to encourage saving by capitalize on existing gambling behavior. However, while this exciting model can help increase participants’ financial security, it comes with some tradeoffs that are not fully addressed in the existing literature. In this paper, I raise concerns about the extent to which PLS substitutes for traditional gambling; its long-term sustainability; and its ethical implications. Drawing on behavioral economics and philosophical principles, I make several suggestions for ways to improve PLS so that it better serves its target audience.

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