Prize-Linked Savings Accounts: A Smart Way to Build an Emergency Fund

Would you use a savings account that also functioned as a lottery ticket? While that may sound like a strange combination, that's precisely the idea behind prize-linked savings accounts, which have surged in popularity in recent years. Here's a rundown of how these accounts work, and the best way to use them.

In a nutshell, a prize-linked savings account works like a traditional bank savings account with one key difference. Instead of paying out interest to depositors, prize-linked accounts pool the interest that they would normally pay out and instead pay large sums to a select few "winners." Essentially, a prize-linked savings account is a form of a lottery ticket you're given in exchange for saving money.

A prize-linked savings account can satisfy your urge to gamble, while also building up your emergency fund. Image source: Getty Images.

Source: Fool.com