A nickel-and-dime approach to college savings

“If a family were to open a 529 plan [or any other savings account] with $1,000, for example, and through the rewards service earn $200 a year in rebates, it represents a 20 percent return before they see any actual return on their plan’s investment,” says Fadule.  Typically, the plans are invested in mutual funds.

Or if a family like the Yagers, who originally planned to save $50 a month from their budget for college, finds they can’t, their savings goal need not drift off course.  “We actually have about $75 a month going into our 529 plan through Upromise,” says Yager.  The Yagers also have Citibank-issued Upromise-linked charge cards, which supercharges the rate at which they earn rebates.

“Participating in a rewards plan is like icing on the cake.  It is fun and keeps saving front of mind,” says Peter D’Angio, a certified financial planner in Denver, who recently joined CollegeInvest as their advisor relationship manager. As an advisor, he found his clients really liked the idea that their spending habits could kick in toward their college funds.

While Upromise turns grocery and retail purchases along with mortgages, realtor’s commissions and travel expenses into rewards, it is not the only fee-free college savings company around. 

“We found people who are concerned about saving for college tend to be online shoppers,” says Suzy DeLine, the chief marketing officer for San Francisco-based Little Grad. Little Grad collects cash-back rebates from over 1,300 online retailers and automatically deposits them into designated accounts, including 529s.  Instead of having members log on to its site then travel to other sites to shop its downloadable program follows users around the web while they shop.  “This way if our member is browsing and decides to buy something at Gap.com, for instance, the Little Grad Savings manager automatically captures the rebate,” adds DeLine.  According to the company, the average Little Grad member — typically in concert with two other family members — will rack up $300 annually in store rebates.  It calculates that with an account invested to earn 6 percent annually, over sixteen years that will add $10,000 to savings.

BabyMint.com is another shopping option.  Here members sign onto the Web site gaining access to several hundred participating merchants.  But BabyMint members can also sign up for a Tuition Rewards benefit. This adds an additional dollar-for-dollar tuition credit to their account, which may be redeemed at affiliated colleges if the beneficiary eventually chooses to attend them. BabyMint has signed up over 175 schools for this program, many of them smaller private liberal arts schools.

With these plans, there is no ‘either or.’  A consumer conceivably could sign up with all three —automatically getting the weekly trips for gas and groceries to ante up to the college savings pot through Upromise, then capturing the virtual purchases through whichever of the three has lined up the online retailer of choice or offers the highest rebate for that retailer. 

Sure, it is a nickel-and-dime strategy.But these programs offer hope among the sales receipts and potentially a few extra thousand dollars for college tuition.

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