Jordan Goodman is the author of Everyone's Money Book, available at 888-201-6300. This is the third edition of the book. You can also visit his Web site at www.moneyanswers.com. He talks with us on Thursday mornings.

January 17, 2002

"Micro-Investing: Investing Rebates On Everyday Purchases"

Host: A dollar here…a dollar there…it all adds up. There’s a name for that. It’s called "micro-investing." And there’s a way to do that, if you do it long enough, that can help pay for college. In this edition of the "Road to Riches," personal finance expert Jordan Goodman has a primer on two programs that’ll do it for you.

  Two firms have popped up recently that allow you to accumulate money for college expenses by registering and buying things at your usual merchants, and on your usual credit cards. They are called UPromise and BabyMint.

For more information, people can go to Upromise.com (888-434-9111) or Babymint.com (888-427-1099.)

It works quite simply -- you sign up for both services for free and register your credit cards with both. As you spend on the cards, and in the affiliated merchants, you get dollars which can then either sit in an account, or can be transferred into a Section 529 plan to use for college expenses. Both rebate a portion of the purchase price up to 20 percent, depending on each merchant.

There are differences between the plans. Upromise is a Registered Investment Advisor and only allows you to invest in the Fidelity and Salomon Smith Barney 529 plans, while Baby Mint allows you to invest in any 529 plan.

Here some of the basics about the plans: Who is BabyMint, Inc.?

Headquartered in Atlanta, BabyMint, Inc. is widely recognized as the leader in micro-investing technology. Through its nationwide network of retailers and name brands, BabyMint’s proprietary “savings engine” enables individual investors to save towards a child's college tuition without incurring out-of-pocket expenses. Conservative estimates show that by depositing rebates on everyday purchases into their educational savings accounts consumers can save as much as $50,000 towards their child’s education through BabyMint, depending upon when they enroll.

The company also licenses its branded technology and infrastructure to financial institutions as a product enhancement for college saving programs, and, in particular, tax free 529 plans and Coverdell education savings accounts (formerly known as the education IRA). Financial institutions offer membership in BabyMint to individual investors (consumers) who register to participate in the program at no cost. The company’s proprietary “savings engine” can be branded and marketed to address various major life expenses (RetireMint, TravelMint, HomeMint, etc.).

Parents, family and friends register with BabyMint at no cost and then receive up to a 25 percent rebate on everyday purchases made through the company’s network of 700 retailers, or when they redeem BabyMint coupons at more than 127,000 grocery stores and mass merchandisers nationwide. BabyMint members can “shop and save” in the following ways:

• ONLINE SHOPPING: With over 200 leading online merchants, BabyMint members earn rebates up to 20 percent of the purchase price for deposit into their college savings account. Online merchants include: Wal-Mart, Gap, PetSmart, Old Navy and LandsEnd, among others.

• OFF-LINE SHOPPING VIA MANUFACTURERS’ COUPONS: BabyMint members can print manufacturers’ coupons directly from the BabyMint site and redeem them in any grocery store or mass merchandiser, including Safeway, Stop & Shop, Wal-Mart, Target, Walgreens, and others. The coupons’ proprietary UPC bar code tracks the redemption value, which is then deposited into the BabyMint member’s account. Participating brands include: Huggies, Kellogg’s, Listerine, Sudafed and Angel Soft, among others.

• OFF-LINE SHOPPING VIA GIFT CERTIFICATES: While shopping at participating brick & mortar retailers and restaurants, BabyMint members can earn up to 5 percent of the purchase price for deposit into their college savings account through the use of gift certificates -- either for their own use, or when the certificates are given to others. Participating retailers and restaurants include Macy’s, ACE Hardware, Pizza Hut, Olive Garden, Marriott Hotels and BlockBuster Video, among others.

• SERVICE PROVIDERS: From long distance to satellite television, BabyMint members earn ongoing rebates and/or one-time bounties simply by using the service providers within the BabyMint network. Participating service providers include GTC Telecom (5¢-a-minute long distance, plus a 5 percent monthly rebate) and Dish Network (satellite television), among others.

• CREDIT CARD PURCHASES: BabyMint, Inc. is currently in discussions with several national credit card issuers, and expects to begin offering a program-affiliated card early in 2002. The card will allow BabyMint members to garner a cash-back rebate on all transactions, regardless of the merchant or product purchased. This rebate would be in addition to any other rebate available to the member through the program (i.e. a member making a $100 purchase at Barnes & Noble would receive the traditional 4 percent rebate, plus an additional 2 percent by using the BabyMint credit card).

Through each of these transaction methods, BabyMint automatically tracks retailer and product rebates, and deposits them into the consumer’s tax-free 529 account or Coverdell ESA. Conservative estimates show that by investing rebates on everyday purchases (a concept know as “micro-investing”) into their educational savings accounts consumers can supplement their traditional savings by as much as $50,000 through the BabyMint program.

Resulting from the emergence of various technologies related to electronic financial transactions, micro-investing -- investing very small amounts over a long period of time -- has gained considerable momentum recently. Most often associated with merchant and credit card rebate programs, the Investment Company Institute estimates that 35 percent of the dollar value of consumers daily purchases could be made available to these “spend and save” programs.

As a product enhancement to mainstream investing vehicles, BabyMint helps differentiate a financial institution from its competitors, and provides a meaningful supplement to traditional methods of garnering client loyalty and increasing assets under management. According to the analysts at TowerGroup, merchant and credit card rebates, such as those facilitated by BabyMint, have the potential to represent an incremental $450 million per year in assets to banks and investment management firms.

Why Would a Financial Institution Be Interested In Offering BabyMint?

Large financial institutions tend to rely on the strength of their reputation/brand and the relationship skills of their advisors to maintain client loyalty and mindshare. Through our nationwide network of retailers and name brands, BabyMint is helping parents become disciplined investors everyday. Once clients are enrolled, each transaction within the BabyMint network becomes an investing “tickler” -- reminding that parent of their college savings objective.

BabyMint generates the majority of its revenue in two ways. First, because BabyMint helps retailers and product manufacturers attract new customers and maintain customer loyalty, the company receives a small rebate, or commission, on each consumer purchase. Although it’s a fraction of what the individual consumer receives, the aggregated purchase volume of the BabyMint member base is significant. Retailers such as Wal-Mart and Barnes & Noble willingly forgo 3 to 10 percent of their top-line revenue on a guaranteed sale, versus spending money on an advertisement that may or may not be effective. They become even more interested in providing these rebates when the alternative is losing the sale to Kmart or Amazon. Product manufacturers participating in the BabyMint program, such as Kellogg’s, Procter & Gamble and Keebler -- who already have substantial rebate and couponing programs -- will often pay rebates in excess of 20 percent on the retail price of their products.

The other way in which the company derives its revenue is through licensing fees paid by financial institutions, and by individual financial advisors who use the BabyMint program to enhance client loyalty and mindshare, while also garnering incremental assets under management.

UPromise is a great company and has done a great job in a collective effort to educate the public to the importance of saving for college. While their program is similar to the BabyMint program, there are some significant differences between the two programs that are important for both consumers and financial advisors to understand.

• BabyMint is Highly Flexible: Unlike UPromise, BabyMint members can direct their investments to any 529 plan or any investment firm of their choosing. Any financial advisor in the country can offer BabyMint to their clients. There is no cost to the advisor or their client. UPromise members must actually open a brokerage account with one of UPromise’s two “in house” investment partners (Fidelity or Salomon Smith Barney). If a consumer already has a relationship with a financial advisor, they will need to begin a second relationship to work with UPromise. BabyMint members are not forced to make that decision.

• UPromise is a Register Investment Advisor: UPromise is registered with the SEC as an RIA and usurps 12B-1 fees from advisors. In this regard, UPromise actually competes with investment advisors. BabyMint is an objective third party and does not participate in these fees. The broker that earns the fees, keeps them.

• BabyMint Pays Out Higher Rebate Amounts: On the consumer side, BabyMint has just as many ways to garner rebates and consistently pays out higher rebate percentages to our members. Some examples include:

	BabyMint	UPromise
PetSmart	7%	3%
Gap Stores	3%	2%
800.com (electronics)	4%	1%
Eddie Bauer	4%	2%

Upromise membership is free and hassle-free: No Upromise membership card to carry; No special credit card you need to use; No need to change how you shop, or what you pay.

Each Upromise contributing company will contribute a percentage of your spending to your college savings. But how does your spending become savings? It's easy! They've created a special connection with each company, so contributions can be automatically deposited into your Upromise account.

They securely track the contributions you receive from contributing companies when you register your:

• Credit cards that you use to shop with contributing companies.
• Loyalty cards, like your CVS ExtraCareSM Card.
• Billing information, such as your AT&T residential billing telephone number.
• Major purchases, like the vehicle identification number of a new GM vehicle.

You will also get automatic contributions whenever you shop online at more than 100 major sites -- just link to them through the Upromise Web site. Your Upromise contributions -- plus any other money you put aside to save for college -- can be professionally invested, and earnings grow federally tax-free.

Upromise makes it easy for you to open an investment account in a Section 529 college investing plan, managed by the world-renowned firms of Salomon Smith BarneySM or Fidelity Investments®. And 529 plans are available to anyone, and are managed according to the child's age, years to enrollment and/or a family's investment goals. Parents retain control of the funds, and any income used to pay for qualified higher education expenses can be withdrawn from your account free from federal income tax.

Once your family opens a 529 account and links it to Upromise, your college contributions will be swept automatically into that account on a quarterly basis, subject to minimum investment amounts. (This hypothetical example assumes a monthly contribution with an annual rate of investment return of 8 percent).

With both your Upromise and 529 accounts in place, you are on your way toward realizing the dream of a college education.