One of the best shortcuts in life is to get paid for something that you are going to do anyway. Well that is sometimes a lot easier said than done, but there are still programs out there that offer that benefit to tens of millions of people if not hundreds of millions were they better known. So is it possible then to save money by….spending money? Why yes it is quite possible, and if you are a college student or a parent and want to give your child the gift of a college education, then there is one program that is a must on your radar and its name is Upromise.
The benefits of Upromise are that it is a credit card rewards program that offers 5% cash back that as a student you can use to pay back your student loans, or if you really want to turn on the afterburners, 10% if you get the Upromise MasterCard. So let’s go through the math.
If you are a college student with an afterschool job that pays lets say $20,000 a year, and you pay 25% in taxes you will be left with $15,000. Now as a college student you probably aren’t going to use all of that money to pay back your loans, you may use $7000 to pay back your loans, and save $8,000 for some spending money. If you are intelligent with your purchases, and use the Upromise MasterCard to get the 10% cash back that is $800 that is going to pay back your loans. You just paid back almost a thousand dollars of your student loans by being more intelligent with the money that you were going to spend anyway!
Ok, now let’s go to a different scenario, let’s say you are married with a child making the average American salary of about $52,000. You want to give your child their best shot at a college education, and you are going to make it a mission of yours to help them pay off their loans. Let’s assume you pay about 30% in taxes which will leave you with $36,400. Then you spend about $21,400 on items that you don’t normally use a credit card for like insurance and your housing bills which will leave you with $15,000. You then spend that fifteen grand, but you sign up for the Upromise MasterCard to get the 10%, and then open a 529b account to save for your child’s college tuition. (If you don’t know what a 529b account is, it is an account that gives you tax advantages for saving money for your child’s college tuition.) The Upromise card gives you $1,500 that you can save in this account for their tuition.
If you save fifteen hundred dollars a year for eighteen years, invest it in an index fund, what will you have once your child goes to college? If the index returns 7% (which is lower than it has historically performed) you would have $50,998.55. That would pay for a year or two of college for your kid, and you would have done it with zero sacrifices on spending or your lifestyle. No assembly required. So to answer your question yes, sometimes it is possible to save money by spending money.