Dear Mr. Berko: We have two sons who are mediocre students. One will be attending college next year when he graduates and the other will attend in 2003. We’ve explored scholarships, but their grades are not As and Bs and they don’t excel enough in special subjects.
My wife and I work two jobs and have saved about $12,000 over the past five years for their college costs. We know that’s not nearly enough, but we also plan to take out a home equity loan and we will withdraw money from our 401(k) plans to assist them with their education.
We heard about a credit card program that puts a percentage of what we spend into an education fund. Can you tell us about it, and how it works and what the costs are?
Now that inflation is gone, we should be able to save more money each year for our boys’ college education. Together, my wife and I earn about $75,000 a year. We figure that because inflation is about 1.5 percent, we can increase by about 3 percent each year the amount we save for our sons’ education.
Dear G.B.: Most people think the inflation beast has been tamed. It isn’t so! The 1.5 percent figure is politically correct, but be mindful that it’s a contrived number constructed by Washington to foster its economic agenda.
Yes, the many components in the formula used to compute inflation truthfully present an inflation rate of 1.5 percent.
Yet those numbers do not include critically important items such as health insurance, homeowner’s and auto insurance, day care, doctors’ exams, accounting services, veterinarian bills and private school tuition.
What’s more, building permits, dog licenses, attorney costs, cable television, home health care, auto mechanic service and appliance repair have all exploded in cost.
So has the cost of a college education. Last year, annual tuition costs at a four-year public college were just about $4,100. That does not include tattoos, pizza, beer, Nikes, smokes, Cokes, body-piercing, clothes, rent, transportation, medical, travel, school supplies, computers and other expenses associated with sending your squirt to school. The actual cost is about $16,000 a year.
Fortunately for your kids, most state colleges have been significantly lowering their entrance requirements. Unfortunately, less than 10 percent of today’s graduating high school seniors are ready for college.
Sadly, from my viewpoint as an employer, 90 percent of today’s graduating college seniors cannot qualify for a job in my office.
Unless your two mediocre lads excel in one of the many scientific disciplines, you must be dumb to consider mortgaging the house and dipping into your pension plan.
Tell those boys to join the armed services, get maturity, get guts and get responsibility. When they get out they might be ready for college. Maybe.
However, the concept you refer to is a for-profit savings plan called Upromise. It provides folks a way to save money for their kids’ college costs when they buy gas, groceries, take their family out to dinner, use AT&T, shop at Barnes and Noble, refinance their mortgage, buy a home, buy a car or shop at some 9,000 registered retailers across the country.
All you have to do is sign up with Upromise. Membership is free and hassle-free.
There are no Upromise cards to carry, no special credit cards to use and no changes in how you shop.
It’s really neat. A little bit of what you spend automatically is credited to your 529 Plan. For instance, Exxon contributes 4 cents for each gallon of fuel you purchase, AT&T contributes 4 percent of your long-distance charges, your grocer will contribute 3 percent to 5 percent on many food items (Kraft, Gerber, Keebler, Kellogg Cereals, Coke, Oscar Mayer and Sprite, to name just a few). Various hotels and many other retailers will contribute a piece of your action to your 529 plan.
It’s easy as pie. Just register your credit card(s) and billing information with www.upromise.com or ring them toll-free at (888) 434-9111.
The dollars in your 529 Upromise plan account will appreciate tax-free, and the withdrawals are tax-free when used to pay college costs.
A family earning $75,000 a year should easily be able to accumulate about $17,000 in 15 years. You can compound that savings, too, if grandparents, stepaunts, cousins, second cousins, uncles, in-laws, brothers and lovers register with Upromise, too.
“I promise,” it’s a good deal.
Malcom Berko responds to every letter he receives; send questions to Berko, c/o Central Penn Business Journal, P.O. Box 1416, Boca Raton, Fla. 33429. Berko, senior vice president of the stockbrokerage firm Advest Inc., answers questions by mail or in his column free of charge. If readers want an in-depth analysis, they may be asked to become a Berko/Advest client.
Copley News Service