529 College savings plans are an excellent way for you to save for your children’s college educations. Two great sites, savingsforcollege.com and collegesavings.org, can help you work through the ins and outs of plans that are available in your state.

UPromise.com is an affinity marketing concept (think free airline miles, free gas, cash back Discover Cards, and discounts on certain cars) that gives you a small percentage of cash back as a contribution to a specified 529 plan if you buy from an affiliated company.

Here are some frequently asked questions about UPromise.com.

To me it seems comparable to a frequent flier program, or American Express Membership Rewards — but instead of saving points for a plane ticket or a toaster, you get to sock some money away for college. Is that a correct comparison?

Yes, this is a correct comparison. You basically buy what you normally buy, and Upromise tracks your spending. However, different companies contribute different amounts to your 529 account. If you rent with Avis they will contribute 5% of what you spend to your 529 plan. ToysRUs contributes 2% of what you spend.

Q:What if my kid never goes to college — what happens to the money?

The money that is contributed from the companies is tracked through Upromise and then invested in a 529 account run by a huge financial investment company, Salomon Smith Barney and Fidelity Investments. 529 plans permit you to transfer the funds to other children, if the named child doesn’t go to college. You should also be able to spend the funds on your own college tuition, or that of your spouse. It’s almost certain someone in your family will go to college.

Q:Are there any downsides to signing up (other than perhaps getting on a million mailing lists), or is it really free money? Some have suggested that with no track record, it remains to be seen what will happen when it comes time to “cash out.”

A:There seems to be no down side other then the obligatory marketing material. You do have to register your credit cards with Upromise because this is how they track your spending. However, once the cash has been transferred to the 529 plan, it’s out of UPromise’s hands. Fidelity Investments and Solomon Smith Barney are well-respected Investment houses. Your investment is safe there.

Q: Is this really NEW (as it seems to me), or are have there been other similar programs out there that maybe have not been as well-marketed?

A: Yes, and no. The concept of affinity marketing programs (i.e. free airline miles, free gas, discounts on GM trucks) isn’t new. But applying it in this way is a new idea. Another site does something similar — BabyMint.com.

Q: We need some big ticket items, like a new car and eventually a new house, so UPromise seems enormously enticing to me — is there anything wrong with looking for a real estate agent and a car dealer who participate? How much money could we potentially accrue in 10 years of saving for college through this program… with big ticket items… or with smaller stuff (like just shopping at Toys R Us and McDonalds — both participate).

A: There’s nothing wrong with looking for a participating retailer. The only problem is if you spend more than you’d have to otherwise. How much will you earn over time? It all depends on how much you spend and where you spend your money. For big ticket items it is a one-time deal. GM contributes only $150 per vehicle you register. Century 21contributes ½% on the purchase or sale of your home (with some exceptions and restrictions). Borders offers a 2% contribution when you buy with one of your credit cards. If you shop often at any of the listed companies that could add up overtime. If you buy a $300,000 home, and C21 will contribute 1/2 %, that’s $1,500 in the bucket. A fine contribution to anyone’s college education.

Q: How does UPromise work behind the scenes? What do they do with the money?

A: UPromise benefits by being paid an administrative fee by the companies involved in the marketing plan. So Upromise charges you nothing. Upromise tracks the money and then invests it in one of your 529 accounts. The money is now in your account where it will grow for your children’s college education expenses.

Q:What about BabyMint.com?

A: BabyMint.com is very similar to UPromise with just a few differences. The company only tracks your spending when you shop on their website. So the savings only comes for internet purchases. Also, you can invest your money into a 529 account at the end of each month or you can have them send you a check for the amount that you spent for the quarter. You can then invest it yourself. The better deal with the 529 is that it’s federal (and often state) tax free.

November 14, 2001