Prize-Linked Savings in Canada: The Complete Guide

Prize-linked savings is a way to save money where part of the yield that would normally pay interest instead funds a chance-based prize, and your principal is never at risk. You keep every dollar you save, your balance earns you free entries into a draw, and you get a shot at winning real money on top of your savings. It is a decades-old, proven idea, and Lodavo is the first app to bring it to Canada. This guide explains what prize-linked savings is, how it works, where it came from, why it is legal here, how it compares to a high-interest savings account, and how Lodavo fits in.

What is prize-linked savings?

Prize-linked savings is a savings product where you put money toward a chance-based prize and your principal is never spent or at risk. Instead of paying you a flat interest rate, the model takes a slice of the yield or sponsorship that would otherwise become interest and pools it into prizes. A few savers win larger sums, everyone keeps their full balance, and saving becomes something you might actually look forward to.

The difference from a plain savings account is the shape of the reward, not the safety of your money. In a regular account, a known interest rate is added to your balance. In a prize-linked account, that would-be yield funds a draw instead. You trade a small, predictable return for the chance at a much bigger one, while the money you saved stays exactly where it was. Nothing you deposit is ever wagered.

How does prize-linked savings work?

The mechanics are simple: you save, your balance is tracked, your savings earn you free draw tickets, a regular draw awards prizes, and your principal stays yours the whole time. The more you save, the more tickets you hold, so people who build a bigger habit get more chances without ever paying to enter. You are rewarded for the saving itself.

The part people get stuck on is where the prize money comes from if nobody buys a ticket. It does not come from other savers’ deposits, and it is not skimmed off your balance. It comes from foregone interest and from sponsorship. Here is the contrast at a glance:

The key line in that table is the bottom one. Your principal is never spent to fund a prize. The prize pool is built from the interest or sponsorship that would otherwise have been small individual payments, redirected so that the upside is concentrated into prizes worth getting excited about.

Where did prize-linked savings come from?

Prize-linked savings is not a new fintech gimmick. It is a model with a long, well-documented track record. The clearest example is the United Kingdom, where the government has run Premium Bonds since 1956, with the first prize draw held in 1957. The principle is exactly the one above: rather than the stake being gambled, the interest on the bonds is distributed as prizes, and the government buys your bonds back at full price whenever you ask. Tens of millions of people hold them today.

In North America, the breakthrough was Save to Win, the first large-scale prize-linked savings program in the United States. It launched in 2009 across eight Michigan credit unions, offering a 100,000 dollar grand prize plus smaller draws to members who saved. According to the program’s results, nearly 12,000 accounts opened in under a year, and most participants had never held a long-term savings account before. The model later expanded to credit unions across many US states. The takeaway is consistent across both stories: when the downside is removed and a prize is added, people who were not saving start saving.

Is prize-linked savings legal in Canada? Is it gambling?

Prize-linked savings is legal in Canada, and it is not a lottery, because it is structured as a contest. Canadian contest law turns on two features: there must be no purchase necessary, meaning a free alternate method of entry exists, and a skill-testing question must be answered before a prize is awarded. Lodavo includes both. You never buy a ticket, and answering a skill-testing question is what makes the draw a contest rather than a game of pure chance.

The deeper reason it is not gambling is that you never put your principal at risk. In gambling, your stake can be lost. Here, your money stays in your own account and keeps earning whatever it already earns, so the worst case is simply that you saved and did not win this time. There is no losing bet. We go through this distinction in full, with the relevant rules, on our guide to whether prize-linked savings is gambling.

Terms and conditions apply. No purchase necessary (alternate method of entry available). Skill-testing question required. Open to legal residents of Canada who are the age of majority. Odds depend on the number of eligible entries received. Full rules and odds at /contest-rules.

Prize-linked savings vs a high-interest savings account (HISA)

A high-interest savings account and prize-linked savings solve different problems. A HISA pays you a known, steady interest rate, which is the right tool when you want a predictable, guaranteed return on a sum of money. Prize-linked savings trades a slice of that guaranteed yield for the chance at a much larger prize, while keeping your principal just as safe. Neither is better in the abstract; they fit different goals.

Context matters here. As of June 2026, the Bank of Canada overnight rate sits at 2.25 percent, and most everyday savings accounts pay well below the headline promotional rates banks advertise for limited windows. If you have a large balance and want certainty, a strong HISA is the better fit and you should take it. If your real problem is that you struggle to save at all, the guaranteed-but-tiny interest on a small balance is not motivating, and that is exactly the gap prize-linked savings fills. For an app-by-app look at the options, see our roundup of the best savings apps in Canada.

Why does prize-linked savings help people actually save?

Most Canadians are not saving much right now. According to Statistics Canada, the household saving rate was 3.5 percent in the first quarter of 2026, near its lowest level in years. Telling people to save more rarely moves that number, because a few dollars of interest on a modest balance gives no real reason to start. The incentive is too small to feel.

Prize-linked savings changes the incentive without changing the safety. You get loss-free upside, the chance at a meaningful prize with nothing to lose, plus a recurring reason to open the app and watch your balance. That combination is what behavioural research behind programs like Save to Win found again and again: the draw turns saving into a habit with a payoff you can feel, and people who had never built savings before started doing it. It works by making the boring thing a little bit fun, never by shaming anyone for where they are starting.

How does Lodavo bring prize-linked savings to Canada?

Lodavo is Canada’s first prize-linked savings app, built in Montreal, and it is free. You connect your existing bank account through Plaid, which covers over 99 percent of deposit accounts in Canada, using read-only access. That means Lodavo can see your savings balance to award tickets but can never withdraw, charge, or transfer your money. Your money stays at your own Canadian bank, earning whatever it already earns. Lodavo is not a deposit account and pays no interest.

From there it runs on the model in this guide. Each week your savings balance earns you free draw tickets, and the free weekly draw pays out, with a chance to win up to 10,000 dollars and a guaranteed weekly prize of at least 100 dollars going to a member every week. Payouts arrive by Interac e-Transfer or bank transfer. You can see which institutions connect on our supported banks page, check how every draw is verified on our provably fair page, and view past results under winning numbers. The more you save, the more tickets you get, and your principal never leaves your hands.