College savings plan is usually a great way to help get grandkids through college

By Deborah Sergeant

Most people would agree that earning a college degree represents an important stepping stone toward a satisfying career. Soaring college expenses can make a college degree a difficult goal for many young people to reach. You can help secure your grandkids’ future by assisting with their tuition.

In New York, anyone can open a section 529 college savings plan for himself or a beneficiary for as little as $25. The funds can cover tuition, room and board and other specified expenses related to earning a degree. Funds saved in the plan incur no tax penalty for qualified withdrawals. The maintenance fee is a modest .49 percent. Other fees apply depending upon the type of 529 plan selected and its size.

The plan currently caps cumulative contributions at $375,000 for each beneficiary among all of his 529 accounts (if a student has more than one). The money may continue to earn dividends. The amount of money saved in a 529 plan does not impact a student’s New York Tuition Assistance Program status or any other state program.

Helping the grandchildren can give you annual state tax deductions of up to $10,000 ($5,000 for a single), although federal tax still applies.

For those who don’t itemize deductions, Jeffrey Feldman, a certified financial planner with Rochester Financial Services in Pittsford, recommends a different route.

“Since [people who don’t itemize] won’t save anything with a 529 account, they can give it to their [adult children] and have them open an account for their grandchildren,” he said. “This is assuming the parents can use the tax deduction.”

You can give tax-free gifts of up to $13,000 as a single and $26,000 as a couple annually. You and your spouse can give up to $52,000 by giving $26,000 to your child and another $26,000 to the spouse.

If your grandchild lives in a different state, check out the parameters of his state’s 529 plan. It may be better than New York’s and you don’t need to be a resident to contribute to the plan, nor does your beneficiary need to attend a school in New York or his state. For example, if your grandchild lives in California and attends school in Florida, you may still help with his college fund.

If you’re a senior on a fixed income, helping the grandkids with a huge gift is next to impossible. Many parents welcome monetary gifts toward their children’s 529 plans in lieu of birthday or Christmas gifts. (If the children really want toys or games, compromise with a token gift and hand over a check to Mom and Dad.) When they’re struggling to pay for their schooling, the extra financial help will matter more than a long-forgotten toy.

Thanks to a bevy of online savings plans, you can also contribute to the kids’ college funds without touching your budget.

UPromise (www.upromise.com), a program of SallieMae, and BabyMint (www.babymint.com) are examples of two free programs that donate a percentage of your purchases (usually 1 to 25 percent) to a Section 529 fund earmarked for your beneficiary’s higher education expenses. Basically, they reward you for making everyday purchases you would make anyway,  such as gas, groceries and clothing.

“This is a great way for grandparents on a fixed income to supplement their contributions,” said Greg Harrison, a financial adviser with Resource Financial Services in Rochester.

All you need to do is sign up online and shop at the participating stores or use the participating services specified by the program. Some of these programs allow you to register your credit cards, debit cards or grocery store shopper card so that buying certain brands at any store will generate more savings.

Some of the specified stores and services are online-only. These must be accessed by first opening the respective program’s website because that’s how your purchases are tracked. Other vendors allow for in-store purchases if you use debit or credit cards you have registered with the program. Still other vendors, such as McDonald’s, contribute to the fund only if you purchase a gift card in advance and then use it for purchases.

Some of these programs offer their own credit card to help you really ratchet up the savings since the program will honor any purchase made on the card and not only ones with specified vendors. The percent contributed by using their credit card is usually higher, too.

Just pay off the balance each month to avoid racking up interest, which would certainly outweigh the cash back or points benefit of paying for everyday purchases through the card.

A few cents here and a few cents there may seem like pittance compared with the astronomical cost of college, but if your grandchildren are small yet, those cents can add up over the course of 15 or 20 years.

The two programs listed above allow you to designate a percentage to each beneficiary listed, so you can specify a higher percentage to go to the grandchild who is closer to graduation.

With point programs such as MyPoints (www.mypoints.com), Memolink (www.memolink.com) or ThankYou Rewards (www.thankyou.com) you can earn cash to deposit into a college fund or gift cards you could use to outfit your college-bound grandchild’s dorm, fill his tank with gas, buy his school supplies and purchase books—all gestures any college student would really appreciate.

These programs work similarly to UPromise and BabyMint, by rewarding you for using certain vendors but MyPoints also rewards members with points for clicking on advertisements and answering marketing surveys.

You should also check with your bank’s debit card. It may offer a program that can be used to earn gift cards or cash back that can help your grandchildren.
So why are all these companies so willing to shower you with cash and gift cards? It all goes back to loyalty. The preferred vendors featured in these programs want to win and keep customers. Offering a little cash back or points towards a gift card makes a sensible investment for them.

Sites like MyPoints and Memolink can also offer companies inexpensive means of gaining consumer information via surveys. (Hint: register with an e-mail account you occasionally dump, not your e-mail account you use for important correspondence. You’re going to receive a lot of spam by registering with MyPoints and Memolink.)

The small amount of money you’re able to provide may seem insignificant in light of huge college expenses; however, any gift can help your college-bound grandchildren towards achieving their goals.