As a rule, Americans don’t always make the best decisions when it comes to saving money. Nearly 70% have under $1,000 in savings while only 6% have over $50,000
Meanwhile, Americans seem to love spending money on the lottery. In 2018, the average American spent $232 on lottery tickets. However, many Americans don’t even play the lottery. This means the actual players spend way more than the national average; they spend over $1,000 a year.
Where many people see a problem, Yotta Savings sees an opportunity. This is a savings account with modest APY: 0.20% to be exact. However, there is the opportunity to earn more, but it’s a literal gamble.
Why Does Yotta Savings Exist?
If you look through the literature on Yotta’s website, they often cite the fact that many Americans have under $400 in savings. A single car repair or medical emergency can spiral into personal debt, so they want to encourage people to be prepared.
If you’re simply looking for a secure way to collect interest, Yotta isn’t your best bet. The 0.20% savings bonus is lower than many savings accounts, and you can easily find an account with a higher APY. Of course, Yotta isn’t focused on these people. They’re more interested in the people who are making poor financial decisions with the hopes of instant gratification.
The fact that Americans spend so much on lottery tickets is a financial concern. Yotta Savings tries to use the psychology of playing the lottery to entice customers to make better financial decisions. They recognize it’s a game of numbers, and the poorest players view prizes differently. A smaller prize will represent a higher portion of their income, which is why lottery players might opt for scratch-off tickets rather than Mega Millions. Realistically, they know winning millions is unlikely. Winning thousands seems possible.
Is there Really No Losing?
Right now, you really cannot lose. You might not earn a cent from the weekly drawings, but you still have the principle savings and collect a 0.20% savings bonus. It’s like buying a lottery ticket but putting the cost of the ticket into your savings account. That’s the model Yotta Savings is relying upon.
Still, this is a savings account. It won’t allow for instant access to your money and there are some limitations associated with this. Transfers and payouts aren’t as instantaneous as handing a ticket to a cashier.
What Are the Limitations?
With any savings account, there comes some positives and negatives. Right now Yotta Savings is limited to its app, so you need a smartphone to save. They also place withdrawal and deposit limits on its customers. The limits are: $10,000 daily, $40,000 monthly, and $99,990 yearly. Customers are also restricted to six withdrawals a month.
Your funds are FDIC insured up to $250,000. Most likely this is why there’s a 10,000 ticket limit. Yotta is not encouraging people to surpass the FDIC insurance cap.
The other limitations are fairly obvious when you understand the system. You swap APY rate for a gamble to win more money. If you withdraw from your savings, you will receive fewer tickets next week. If you deposit more, you receive more tickets. In fact, Yotta has allowed customers to make automatic monthly contributions to encourage more savings.
How Much Can You Win With Yotta Savings?
Prizes vary depending on your luck. After all, this is a lottery-based system. For every $25 you have in your savings account, you get one ticket. The maximum number of tickets you can receive is 10,000, so there’s no need to save beyond $250,000.
Each tickets has seven numbers: one being the Yotta Ball number. If you match the Yotta Ball number and the other six numbers you win the $10,000,000 grand prize. Your odds of doing this: 1 in over 8.2 billion. It’s very likely no one will win this prize, but you can still win something. If you have a few matching numbers, or just the Yotta Ball number, you can win a small prize. Low prizes are: $0.10, $0.15, or $0.25. This seem minuscule, but when you’re looking at weekly earnings in a savings account, it can be fairly substantial.
Reportedly, this makes the actual savings bonus closer to 1.8% and 2%. This number isn’t solid, and will change when Yotta increases in popularity. This is because all prizes over $999.99 are automatically split if there are multiple winners.
Will People Really Want to Save More?
Yotta Savings states their mission is to make savings fun. While gambling isn’t everyone’s idea of fun, a lot of people seem to enjoy it. In the UK, Premier Bonds system has been encouraging people to save. With an effective 1.25% interest rate, people can purchase bonds in hopes of winning prizes ranging from £25 to £1 million. The system has been wildly successful, holding over £193 billion in bonds.
Other countries have also opted for prize-linked savings. In South Africa, a prize-linked savings initiative at The First National Bank encouraged citizens to start saving. The bank saw an increase in new accounts, particularly among poorer citizens, and a slight rise in savings.
Yotta Savings hopes to recreate this magic, as prize-linked savings have been beneficial to customers who enroll. The system turns saving into a game, but they will be faced with the challenge creating a new stigma behind savings and interest.
Should You Sign Up for Yotta Savings?
If you’re comfortable with your current savings account, you might want to skip this. Personally, I am not a fan of gambling. If I know I have a stable high-yield savings account, I’m not going to transfer savings into a lottery system.
Not everyone thinks like me. Some people like the thrill of the gamble, and this is a safe way to get that high. If you want to turn saving into a game, Yotta seems like a good place to start. After all, you lose nothing. All of the money deposited into your account is available for withdrawal at a later date.
Regardless of your decision, Yotta is taking a fairly unique approach to encourage savings. They identified potentially harmful behaviors and are trying to convert them into healthier habits. It seems unlikely anyone will walk out with the grand prize, but ultimately, that’s not really the goal. The goal is to show people that saving money does have a return. Whether it’s a couple cents from a winning ticket or your $0.20% saving bonus, there is real money to be earned.
Originally published at https://www.michaelbeausoleil.com on September 30, 2020.