WASHINGTON — Banks will be able to encourage customer to take a chance on saving under legislation that President Barack Obama signed into law Thursday.

WASHINGTON — Banks will be able to encourage customer to take a chance on saving under legislation that President Barack Obama signed into law Thursday.


The legislation, which Rep. Tom Cotton, R-Dardanelle, co-sponsored, would allow banks and thrifts to offer prize-linked savings accounts similar to ones available now at credit unions in a dozen states.


In a Michigan "Save to Win" program, credit union participants who deposit $25 into their savings account are entered into a monthly drawing where they can win up to $3,750.


Early data from the program shows that the incentive has been successful at encouraging first-time savers and low- to moderate-income savers, according to Cotton.


"I am pleased the American Savings Promotion Act is now law. This bill is not only a win for individuals and families who need to build savings, it’s proof that Washington can work toward common sense solutions," Cotton said.


Obama signed 51 bills into law on Thursday.


The American Savings Promotion Act was introduced into Congress last year by Rep. Derek Kilmer, D-Wash. Cotton and Rep. Niki Tsongas, D-Mass., were original co-sponsors. The bill passed the House on Sept. 15 by voice vote and cleared the Senate by unanimous consent on Dec. 10.


Cotton and Kilmer said that savings is one of the most critical factors in economic mobility.


The Pew Foundation’s Economic Mobility Project found that 71 percent of children born to high-saving but low-income parents emerge from the bottom income quintile in one generation, compared to only 50 percent of children from non-saving low-income households.


But, too many Americans live paycheck to paycheck. Forty-four percent of American households lack the savings needed to cover basic expenses for three months, they said.