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Rating:Chicago-Area Fund Firm Goes All Out on College Savings Not Rated 5.0 Email Routing List Email & Route  Print Print
Friday, June 30, 2006

Chicago-Area Fund Firm Goes All Out on College Savings

Reported by Marie Glancy

It turns out that 529 plans aren't the only route by which some investment companies have become involved in financing education.

Monetta Mutual Funds, based in Wheaton, Illinois, signed up two years ago with the "Tuition Rewards" program of SAGE Scholars, an education and funding provider. The arrangement is something like a frequent flier plan for college savers, and according to Monetta founder and president Bob Bacarella, it's part of a sweeping commitment the company's made to engaging whole families in the saving and investment process.

"We're big on financial literacy," he told the MFWire recently. He contends Monetta goes to unique lengths to give kids and teenagers some understanding of financial concepts, with a Web site featuring games and prizes, thematic short stories, and extensive information resources. "Someone just won a Game Boy Advance(TM)," he enthused. "Everybody loves it that we've talked to."

The partnership with SAGE -- or Savings and Growth for Education -- allows Monetta fund shareholders to designate any family member under 16 as the recipient of college tuition credits of up to $24,700. The credits accrue at a rate of 2.5 percent of the shareholder's account value semi-annually, and are redeemable at more than 180 participating U.S. colleges.

Other financial institutions offer SAGE's Tuition Rewards, but according to Bacarella, "only a handful of mutual funds have signed up to make the program available through their investment options."

"Every family that's saving for college should be in this program," he said. While he said the plan complements a 529, he also has criticisms of 529 accounts, particularly the "tremendous fees" associated with them. And now that new regulations mandate more disclosure, "a lot of brokers are saying it's not worth it," he added.

Meanwhile, Tuition Rewards has proved popular with brokers, he said -- with a major catch. "They put their families in, but not their clients," he said. "Because it's no load, and they don't get paid."

With a minimum investment of only $250 plus deposits of $25 per month, Monetta's funds "are not after that large-end market," Bacarella said. The company even offers $500 in bonus credits just for joining the Tuition Rewards program. But, though customers have accumulated over $285,000 in credits so far, Bacarella is anxious to realize participation on a much larger scale.

"The problem is how to get the word out," he said. "I envision this being much bigger than it is today."  

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