An Easy Promise to Keep
Posted on 04 20, 2006 under Brokedad by cgillis |
The Keebler Elves came up with twelve cents. Tony the Tiger pitched in seventeen. Reckitt Benckiser chipped in a dollar and I don’t even know who they are. Every time I visit the local grocery store major retail brands make a small contribution to my child’s college fund. It comes in nickels and dimes, often with little initiative on my part. This effortless fundraising occurs because my wife took two minutes to register our family with UPromise, an organization that links corporations willing to donate money to people like me who are willing to accept it.
Stated simply, UPromise puts extra money in your college savings account. Corporations donate money to UPromise to gain customer awareness and loyalty. It’s a win-win situation. At the center of the UPromise world is the Section 529 savings plan. 529 plans come in a couple of flavors, but the most common is the standard college savings plan. Funds invested in a 529 plan mature and grow over time like any other investment, with a major added benefit that distributions from the plan are tax free if these funds are used for college expenses. Save for college using a standard brokerage account and in addition to the normal brokerage fees you’ll also get hit with a hefty capital gains tax once you pull the money for college or any other reason. Invest in a 529 plan and when you pull that money out for school you can do so without giving a cut to Uncle Sam.
Register your credit cards with UPromise and they automatically seek out participating purchases. All you have to do is shop. The money magically appears in your account. You can use the funds you collect to open a new 529 plan, or you can link them to an existing plan. The list of participating companies is long and varied. Shopping online is even nicer when you see that your purchase will kick a rebate back to your savings.
Contributions are usually between 1% and 4% of the purchase; however you can rack up real money if you buy big ticket items like a computer or even a house. Use a broker in conjunction with UPromise and your next home purchase can help you sock away up to $3,000.00 in your 529. We raised $300.00 without even trying. Now we actually seek out the participating companies. I have to gas up my car so I might as well visit the station that is willing to put a few cents towards my son’s college.
Is it really worth it to get fourteen cents back on the purchase of a tank of gas? By the time my first son is college age, a university education is estimated to cost $105,000. His brother will start a couple of years later, with an estimated cost of $118,000. It doesn’t take an accountant to figure out that I have some serious saving required. Knowing that, I’ll take every cent that corporate America is willing to give.
April 21st, 2006 at 10:05 am
The problem I have with Upromise is that this plan will only work if, when using credit cards(which is how most people will use it), you pay off your card in full every month and never have a late payment. Otherwise you negate any savings. Given the way that CC companies are looking to stick it to their customers these days that is very likely to happen. And if you are carrying a balance you are just fooling yourself.
Also, I\’m not a fan of 529 plans. Most are too restrictive and make it hard to move your money around should you be stuck with a dog of a fund. Better to do an ESA (Education Savings Account). It has all the benefits of the 529 and you have all the control. You can put up to $2000/year into it. Btw, $2000/year for 18 years will get you $100k without having to risk dealing with CC companies.
April 23rd, 2006 at 6:16 am
You have some valid points. Even if you don’t use credit cards you can still link other people’s credit cards to your UPromise account. I may not use a credit card much, but both my brothers may so I might as well get credit from their purchases if they don’t have kids to save for. I do shop online so credit card purchases are unavoidable. When I buy mother’s day flowers I’ll do it online and get 10% back through Hallmark / UPromise. I agree with your point, careless use of a credit card can minimize the benefit. Credit card companies will screw you if you give them half a chance.
As for 529s, they exist as another investment option. Of course there are as many options as there are risk tolerances. I believe many parents who are not sophisticated investors can benefit by the ease of setting up and maintaining a 529 plan. The best form of the 529 is disappearing – the prepaid tuition plan. In some states you can actually lock in the full degree costs at today’s prices. Sadly after a couple of years they stopped new enrollments in my state. Two years ago my graduate program cost me $45,000.00. Now it costs $60,000.00. I believe any program that encourages families to save for college should be considered. Each family should pick the plan that fits their comfort level and savings strategy. My fear is that some families don’t start any form of investment for college until it is too late.
Anyone else who needs more information about the options can learn more by clicking here.
[URL=http://www.irs.gov/pub/irs-pdf/p970.pdf]IRS Publication 970[/URL]
May 11th, 2006 at 7:38 am
I\’ve been a member of upromise for over a year and I like it. I get 5% back from my credit card at the grocery store and upromise $. I like it a lot, and I do try to pay off that credit card every month. Another idea is to use the now-ubiquitous debit cards withe Visa/MC symbol for upromise purchases to avoid the credit card trap!