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Turbocharging Your 529 Plan
By
Jeff Pasternack
05/20/03
As with other social castes, technopeasants and their money often go their separate ways. Therefore, one might put forth the proposition that technopeasants have no business giving financial advice and, surely, that people who would follow such advice will shortly be on their way to financial ruin. It is against this backdrop of cold, hard reason that this column will not provide financial advice, per se. Excusing the oh-so-90ís buzzwords, this column will demonstrate one method for harnessing the power of the Internet and transforming it into college savings for your children (or anyone else seeking higher education).

529 plans are an investment plan operated by a state designed to help families save for future college costs and you can learn all about them at SavingForCollege.com. This comprehensive site describes the different 529 plans offered by the states. Most 529 plan investments can be used at practically any accredited college or university and this site can help you decide which stateís plan is right for you. You can also connect with a consultant if your own financial advisor isnít knowledgeable.

Once youíve enrolled in a 529 plan, the trick to kick-starting the savings is to find ways to turn your everyday spending activities into savings opportunities. One site to visit is Upromise.com. It offers cash rewards for making purchases with their affiliated vendors. To receive these rewards, simply register on the site, provide 529 plan information and register your credit card(s). Every purchase you make through Upromise is turned into cash for your child on a monthly or quarterly basis.

Peeling away the marketing fluff, hereís a glimpse into the shadowy world of companies that sell information on your spending habits. You buy goods and services with your credit cards. Your credit card companies collect information about your spending habits. If you belong to a grocery store or pharmacy loyalty programs, they too collect this information. Like it or not, your spending habits are tracked by practically all the big stores. They turn your information into cash by selling, in aggregate, it to companies who aggregate and analyze the information. In turn, the aggregators resell the data back to the stores and other interested parties.

For example, a grocery store can probably demonstrate that 433,000 more of their shoppers buy more tissue paper during winter (cold and flu season) than other times of the year. The store approaches Kimberly-Clark (they make Kleenex) and negotiates a deal; give us 30 cents off per box and weíll give our customers 25 cents off and keep 5. Alternatively, the store sells the information to a company paid by Kimberly-Clark to analyze sales data and help develop incentive programs for Kimberly-Clark to offer to stores.

Essentially, once you accept that your spending habits are bought and sold every day, you can open yourself up to the good news: the sale of your spending habits can give you greater savings than the published discount.

When you register your credit and store loyalty cards with Upromise, they collect information about your spending habits and sell it to their affiliated vendors. Vendors provide a discount that is tracked and awarded by Upromise. Usually within 90 days of purchase, Upromise will deposit cash into your childís 529 account or send you a check.

Upromise also has their own credit card that gives an additional 1 percent to the 529 plan, regardless what you buy. Some 529 plan managers, such as Fidelity Investments, have a card that awards 2 percent of your purchases. So not only can you get 2 percent on, say, a Staples purchase made through Upromise, but you can earn an additional 1-2 percent from the credit card. But wait, thereís more! Letís add a little TechnoPeasant magic and turbo-charge those savings.

In December 2002 I wrote about bargain hunting on the Web through sites such as TechBargains.com, SlickDeals.net and DealCatcher.com. You can combine discount codes listed on these sites with your Upromise loyalty rewards and the rewards from your credit card company. Letís examine a recent purchase that shows my fish how much I love them.

DealCatcher.com listed a coupon code good for $5 off a $50 order at Petsmart.com. I logged into Upromise.com and found that if I buy through Upromiseís link to Petsmart.com, Upromise will contribute 5 percent of the order to my sonís 529 plan. By using my Fidelity Investmentís Mastercard, I can earn an additional 2 percent. So hereís how the math works. Including shipping, the order amount is $58.96. Subtract $5 from the DealCatcher.com code and the total to be charged is $53.96. Upromise contributes 5 percent and Fidelity contributes another 2 percent, which equals $3.78. The result is that I saved nearly 15 percent in total, with 7 percent going to the 529 plan.

This also works for in-store purchases. Letís say you go to Staples and buy a pack of 100 blank CDs for $20. You whip out your Fidelity card and close the deal. Upromise and Fidelity both give you 40 cents (2 percent from each). Then, because you are a savvy shopper and you looked at the in-store flyer, you see that the CD maker has a $20 rebate on the CDs. Send in the card and 8 weeks later your $20 check arrives. In essence, you were paid 80 cents to buy 100 CDs.

The final kicker to all of this is that if you enroll your whole family, your medical or legal practice or any other business you own, the dollars mount up pretty quickly. For my 2 and a half-year-old sonís 529 plan, I have 4 adults and one business that are feeding his college account. We regularly pull in more than $50 a month. If we maintain $50 a month over the next 15 years (assuming these opportunities continue to exist) with 4 percent interest compounded annually, weíll have been paid $13,575.28.

The way I see it, companies are making a fortune selling my spending habits. Why shouldnít I get my cut?

Jeff Pasternack is the president of Dynamic Consulting Group, a franchise partner of 1-800-GOT-JUNK? and author of the TechnoPeasant Review.
If you have questions or comments about this column, please write to him at Jeff@TheDCG.com.