Enhancing College Savings with the Upromise Shopping Plan

Some 529B college savings plans allow you to leverage your investment by participating in the Upromise program which can be found on the web at Upromise.com. The program is basically a marketing program for member businesses. Competition for consumers' retail dollars is fierce and one way savvy retailers have found to increase their sales is by participating in rebate programs like Upromise. Computer technology has made it possible to track a consumer's purchases and, in return for purchasing products from participating merchants, receive a rebate that is automatically deposited to the shopper's account. There are many programs like this with new ones appearing regularly. Some send checks periodically or when the account balance reaches a certain minimum while others are designed as savings plans with the rebate money going to a retirement or other type of savings vehicle. Upromise is of this variety.

Upromise is free to join and easy to use. It started with goods sold in grocery stores and utilized the store's shopping cards which already gave shoppers discounts on certain items when they presented the card at time of checkout. By registering one's store shopping cards with Upromise the shopper was able to have their purchases of Upromise items recorded and have the rebated credited to their Upromise account. The service has now expanded to other merchants, such as restaurants, and for these they use the shopper's credit card as the vehicle for tracking purchases (the credit card has to be registered with Upromise to do this). They also provide a web portal through which shoppers can shop at participating stores on the web and receive rebates from participating merchants.

In addition to joining Upromise and registering their grocery store shopper's cards and credit cards, the individual also has to open a 529B account with a participating 529B provider. The 529B accounts are sponsored by individual states (all states sponsor one or more of these accounts) but are usually managed by regular investment companies. Not all 529B plans participate in the Upromise program and, in addition to the usual investment concerns associated with any type of investment fund, one also has to look at state as well as Federal income tax treatment. All state approved plans exempt the investment income generated by the plan from Federal Income Tax provided they are used for approved educational purposes. Further, anyone can invest in a state plan regardless of where they live and where their child decides to attend college. However, some states also exempt the income generated by the plan from state income taxes for residents of their state who invest in that state's plan. A couple also allow residents who invest in the state plan to deduct their contributions to the state plan from income for state income tax purposes. If you live in a state with a plan that has state tax breaks but the plan does not participate in the Upromise program, it might be more beneficial to invest in that plan and forgo Upromise than join another plan for the Upromise benefits but forgo the state income tax benefits.

If you do join Upromise don't expect to fund your child's education with Upromise rebates as these will probably generate enough funds to pay, at most, the first semester's tuition at a community college provided you join when the child is still a baby. Instead, look upon these rebates as a means of increasing your rate of return. Adding the rebates to the interest or dividends that are paid on your account result, especially in the early years when the account is small and investment income correspondingly low, allows you to increase the rate of return on the investment. Of course, you also should not purchase Upromise participating items unless you intend to purchase the item anyway. Paying an extra two dollars for the Upromise item just to obtain a fifty cent rebate does not make a lot of sense (it would make more sense to purchase the less expensive item and add the $2 savings to your child's college fund). So, despite what the participating merchants would like, you view this program as a part of your over all spending and savings plans and use it only where you benefit overall.