Millennials get an extra boost to save for cars and homes

Saving for a goal used to involve stuffing coins into a giant jar, opening a bank account or buying U.S. savings bonds.

Now, a Detroit-based start-up is tempting millennials to treat building savings a lot like the way you keep up with friends via Facebook or Instagram. What about turning to a new "social savings platform" to add to your down payment for a car or a house?

Could friends and family like you have enough to add an extra $25, $50 or $100 to your online account?

To make the idea more appealing,  Detroit-based BoostUp gets companies to "boost" your savings with added deals and promotions. Offers now include: allowing you to set aside at least $750 in a BoostUp account in order to get $750 from Quicken Loans, if you get your mortgage there. Or account holders can set aside $500 in savings to get an extra $500 toward a down payment on a Hyundai. Some real estate agents are participating with some offers, too.

It's an idea that some millennials are certainly looking at these days — especially as it's tough to build much extra savings just by letting money sit in the bank at miserably low interest rates.

Whether the idea really takes off, of course, will depend on how big the discounts get and how much millennials want to play the savings game.

Andrei Simonov, associate professor of finance at the Eli Broad College of Business at Michigan State University, said social savings platforms can mirror the ease of Facebook and make giving online become more attractive.

"You can see that John Doe contributed $10 to his friend's car," Simonov said. "It is convenient. No need to send a check or drive 10 miles to meet the person."

It's also possible that someone who gets money from friends, family or strangers for a down payment could be more likely to buckle down to reach the bigger goal, such as actually buying a house or a new car.

Eilijah Lawson, 25, who lives in Pontiac, said he and his fiancée, Miho Suga, 24, are considering setting up a BoostUp account in order to build a bigger down payment for their first home. They plan to marry next August and hope to find a home in Royal Oak.

Lawson has a variety of jobs, including working at Home Depot and writing for the Ohio-based Columbus Craft Beer Consortium website about craft beers. His fiance is working as a resident at a local hospital and plans to work in family medicine.

They are saving for their first home on their own but they are tempted by the idea of being able to turn to family and friends, too.

"We have a solid group of friends and family," Lawson said. "We're all really close. We have a lot of people who we know will help us."

Michael Mendez, 32, who works in IT at a construction staffing firm in Cleveland, originally spotted the unusual offer relating to Hyundai online. If he signed up for BoostUp and saved money in one of those accounts, Hyundai would match his savings dollar for dollar up to $500.

Not a bad deal at all, he figured, especially since saving rates are so low. Ultimately, though, he didn’t buy a Hyundai because he later found a better lease deal for himself on a Jeep Cherokee.

Mendez, who lives in Cleveland Heights now, could have closed the account and gotten his money. But instead, he kept his BoostUp account open when he realized that Quicken would offer him a dollar-for-dollar deal up to $750.

Now he plans to use that money to cover some closing costs when he buys a $75,000 home in South Euclid, Ohio, with a mortgage through Quicken. The deal is expected to cover about a quarter or more of his closing costs.

“The amount of the Quicken match is pretty impressive,” Mendez said.

Granted, Mendez said he wouldn’t use the BoostUp account for just anything because matching dollar-for-dollar cash is offered right now only via two deals through Hyundai or Quicken.

And unlike a certificate of deposit or mutual fund, you're not building any interest or return on investment by letting money sit in the BoostUp account. No interest is paid on BoostUp savings.

“I wouldn’t use it as a savings account because you’re not getting any interest,” Mendez said.

Mike Addison, 25, said the BoostUp idea is particularly attractive because he's not really earning much interest in his credit union account, so it's harder to build up a down payment for a home. But the extra matching money, even with limits, through BoostUp is attractive.

"They're going to be matching us dollar for dollar," Addison said. "Why wouldn't I use it?"

He's working part-time now at Best Buy in West Bloomfield, has plans to go into the Navy and get married Oct. 10. The couple are looking to buy a home in  Michigan. They've looked at a condo for $40,000 and a home for $115,000.

Addison and his fiance, Maria Crowe, 18, asked friends to contribute to a down payment for a home for wedding gifts.

John Morgan, CEO of BoostUp, said the site is geared to work with younger consumers who often struggle with coming up with a down payment for a first home or a first car.  And this concept allows savers to track their progress online.

"The concept of matching someone's savings is not new," Morgan said, noting that his own parents encouraged him to work as a teen by offering to match some of his money to buy his first car.

Mom and Dad, naturally, can contribute to your account. If you want, you can ask strangers or anyone to contribute.

"If they want to post it on Facebook, share it on Twitter or anywhere else, then family, friends or strangers can give to them through their public BoostUp page — just like any crowdfunding site," Morgan said.

Maybe users ask wedding guests to contribute to a BoostUp account instead of buying the traditional china. Or maybe you make a request around your birthday.

"Do you need another iTunes gift card?" Morgan asked.

The accounts work best, he said, when someone knows they're going to buy a car or need a down payment for a home in the next six months to a year or so. And the extra boosts help if you are aiming to buy a certain car or work with a specific lender or real estate agent participating in the program.

"Our uniqueness is you can bring in 'Boosts,' " said Morgan, 39, whose tech start-up operates out of the Madison Building (M@adison) in downtown Detroit.

Morgan said BoostUp is paid by the partners the company works with – such as through marketing fees, platform usage fees and/or success fees.

Of course, car companies, retailers and others have long offered credit cards that help you build reward points that can cut the cost of their products, too.

But Morgan said millennials are more of an "online generation" and can find this approach appealing, especially since some aversions to traditional banks after the financial crisis.

"We're not looking to replace the bank," he said.

With the Hyundai deal, for example, Hyundai will match the savings in a BoostUp account dollar-for-dollar up to $500 when someone buys a new Hyundai vehicle and has saved in a BoostUp account for at least 30 days.

The matching dollars are made by program participants. So if you wanted to buy a Chevy Cruze, the accounts right now wouldn't offer a dollar-for-dollar match at this point. And you could take your money out of the account with no fees if you changed your mind.

Tom LaSorda, former Chrysler CEO  has an investment in BoostUp through his  IncWell Venture Capital. LaSorda said the strategy behind BoostUp is to find a creative way to link young consumers early on with a given product or company.

When someone signs up for BoostUp, he or she gets an extra discount on the price of a Hyundai  car or some extra cost savings when taking out a mortgage with Quicken.

“You actually have brands help you along and give you a deal,” LaSorda said. “It’s a win-win for everybody. It’s great for the brand. That’s a great hook.”

BoostUp was initially launched as Motozuma.com in 2010 in Chicago.

But Morgan moved to Detroit in August 2013 to take advantage of opportunities in the city's tech corridor. Morgan received about about $1 million in seed capital from Detroit Venture Partners, a venture capital firm led by Quicken Loans founder Dan Gilbert.

BoostUp now has more than 44,000 accounts. The average account dedicated toward buying a Hyundai has $1,340. The mortgage feature is newer, so Boost Up is not disclosing numbers.

In July, BoostUp offered a home buying platform that allows real estate professionals nationwide a chance to connect with active home buyers and make getting a down payment easier.

"Housing, we feel, has a bigger upside because you can't purchase a home without a down payment and it's the biggest obstacle for first time home buyers," Morgan said.

Bob Walters, chief economist for Quicken, said millennials are likely to be a huge driving force for the housing market over the next few decades. That extra $750 could be meaningful, Walters said, especially since many first-time home buyers are in the market for a home that costs around $90,000 to $150,000. They might also qualify for other programs, including FHA.

Brokers and real estate agents that partner with BoostUp get a customized landing page that can boost traffic. Real estate agents only have to pay their "boost" after the closing of a home purchase. The real estate agent, of course, connects with new leads that could allow them to sell more homes.

Michelle Coleman, 28, who is a real estate agent at REMAX Classic in Bloomfield Hills, is taking part in the online platform as a way to build business with millennials. She's offering a dollar-for-dollar match on up to $500 in savings toward a down payment for those who save through BoostUp.

Coleman sees the separate, dedicated account as a way to really commit to saving for a new home.

Otherwise, she said, it's too easy to transfer money out of savings into checking and spend it on regular bills or impulse purchases. Plus, she said, she can see millennials taking an interest in this kind of online savings platform.

"You have things like GoFundMe," Coleman said. "You see it for charities. Someone wants to take a trip."

Why not ask someone to contribute to your down payment for a house as a birthday gift? Coleman asked. She's told one of her friends who's house shopping to do just that.

"It's very convenient."

Contact Susan Tompor: 313-222-8876 or stompor@freepress.com. Follow Susan on Twitter @Tompor.