Turn Your Spare Change Into An Investment Account With Acorns
Maybe you’ve heard about the Acorns investing app. It has stirred up a lot of media attention with both journalist and investors as millennials have finally been interested in dipping their toes into the markets with the app. As of right now, they’ve attracted nearly 1 million users and raised close to $100 million dollars in venture capital, closing their most recent round of funding May 2017.
You may have some questions about the Acorns app and if it’s right for you. If you’re interested in an easy way to get started investing with little money up front, then stick around because I’m going to lay out exactly how you can get started.
If you know you want to set up an Acorns account, click here to sign up for your free account. You’ll get $5 for free when you sign up through our exclusive link to kick your account off.
How Does The Acorns Investing App Work?
Simply put, Acorns invests your spare change through a system called “round-ups”. This happens by connecting your bank account (debit or credit card) and spending as you would normally. As you do this, the app monitors your bank account and invests the “spare change” from your daily purchases, just as you would throw the pennies into a jar at the end of the day if you use cash.
For example, if you buy a coffee for 75 cents, Acorns would (round up your purchase to $1 and) invest the remaining spare change (25 cents) into your Acorns investment account.
The great thing about his is that it’s simple. The app automatically does this and invests your change in a portfolio. Acorns portfolio is backed by Harry Markowitz, the founder of the Modern Portfolio Theory who has one a Nobel Prize for his work. Each user can choose how aggressive they want their portfolio to be on a scale of very conservative to very aggressive.
The benefit of the Acorns app is that unlike a lot of other financial investing apps there is no upfront deposit amount or minimum balance. Also, the app is built with a “mobile first” mindset, meaning that all of the setup is possible through Acorns mobile app which is available for both Android and IOS.
“People like the idea of investing spare change. The typical idea of investing is that you need a lot of money to do it but not with Acorns” — Jeff Cruttenden, CEO of Acorns
Acorns cofounders, father and son Jeff (L) and Walter (R) Cruttenden.
How Much Does Acorns Investing Cost?
The fees are $1 per month for accounts under $5,000 and .25% of the balance per year on accounts over $5,000. In comparison to other mutual funds and DIY ETFs, this fee structure is very low. Other services such as Amerivest charge up to 1.25% and require a minimum investment of $25,000. If you are investing under $5,000 per year it will cost you the same amount as a dinner out, which is not bad in my opinion.
The great thing about Acorns is that the more transactions you have (the more you’re spending, perhaps multiple small purchases like coffee or fast food) the more you invest. At 100 transactions per month with an average of $.25 per transaction, you’ll invest $25 the first month. At 150 transactions, you’re investing $37.50.
While this doesn’t sound like much, the key is to think of ways to make your money work for you, rather than sitting under your mattress and collecting dust.
Some argue that Acorns fees are too much if you are only investing so little each month. This is a valid argument although I think there are plenty of other ways you can make up for that lost $1.
For example, the $1 is nothing when you look at what you spend on worthless things that don’t give you anything in return. Acorns provide a beautiful app that helps the average consumer engage in the stock market. This at one time was off limits to those who didn’t have $10,000 or more in liquid cash to start investing.
The other great thing about Acorns is that you can choose to invest additional money through the app in addition to your “spare change”. You have the option to invest however much you want each day, week, or month. You can choose if you want to invest more, for example, if you want to invest an additional $5 per week, it will automatically deduct that from your account.
The Acorns app isn’t for everyone though. If you are a seasoned investor, you are probably more concerned about analyzing stocks and companies on a granular level before investing in ETF’s. Acorns is in the market to appeal to millennials looking to dip their toes into the waters of investing who likely have not considered looking into one of the traditional investment brokerage accounts before.
I would also argue that if you are working your way out of debt and have every dollar budgeted for, then Acorns may not be for you either. Because it “rounds up” your purchases, it often can make zero-sum budgeting a little more difficult to predict. I will say that we have used Acorns for the last year and have not has many issues with this screwing up our budget but this could be a valid concern for some.
While putting your money into a high-interest savings account is an option if you want to start getting a return on your money, they often only provide a 1% return. Acorns is a great app to put your spare change if you want to make your money work for you, which is why I use it.
Reviews of Acorns From Actual Users
If you are still curious about why this is a good place to get started investing, hear out a couple other reviews that I gathered from real users:
“The thing about Acorns is how effortless it is. Really easy to put money in and take it out, and the round-ups mean it’s always growing even if I’m not actively contributing. I put bigger sums in when stocks are down, this strategy is working well for me so far. Communication from the company is very good and everything is above board. Fees are very low. I would definitely recommend them to anyone.” Jim B.
“I’ve been with Acorns for about 18 months now here in Australia. I’m seeing 4.8% growth so far over that time. Much better than “high” interest savings accounts here which yield 3.05% at best, with many caveats. It’s a no-brainer. Very happy with them so far and have $7k invested. It’s a nice part of my portfolio at this point.” Loala C.
“I started using Acorn 1 year and 8 months ago. It was what first venture into the world of investing. And I can’t be more pleased. I’ve Invested $7416.00. Ive received $240 in dividends and my account is worth. $8500. That’s a 15% gain. I also have a betterment account which holds my IRA and a few other goal-oriented taxable account. When I heard about Stash I went ahead and opened an account there also just to try it out.” Jimmy C.
“I started using Acorns about 3 months ago. I have invested about $1450 and gained about $25. $300 or more of my investment was from round-ups. That is mind-blowing. If I did not realize when the spare change left my account, then $3 in 90 days as fees is nothing. BANK OF AMERICA charges me $12 monthly. I never saw myself saving that much money in a bank but I’m a crazy investor as I have just discovered. I love Acorns because they’ll soon become Oak Trees.” Lisa L.
How To Set Up An Acorns Account
Acorns, while free to download will cost you $15 a year if your portfolio is worth less than $5000 or 0.275% if it’s worth more than that. Still significantly less than a traditional broker.
I’ve been using the app for about six months now, depositing in regular round-ups and seeing if I can actually make any money.
Signing up to the service is super easy.
Sign up for Acorns to create an account. It will ask for some personal details to help work out the best investment portfolio for you, so if you hate the idea of sharing how much you make per year, this might not be for you.
Once you have the app, create a username and password. You will also be able to create four-digit phone passcode.
Once you’ve created your account, link your bank accounts and credit cards. All the big banks are here, plus most other institutions under the more banks section. In order to qualify for the “roundups” you must link at least one card to your account. (In order to qualify for our $100 cash giveaway you must complete this).
Acorns will ask you a few questions before you get started. Acorns founder says the team spent two and a half years making sure the financial back-end was solid.
Dr. Harry Markowitz, the Nobel Laureate and pioneer of “modern portfolio theory,” helped build the Acorns investing portfolios.
Acorns will ask you a few questions about your life so it can give you a recommendation of which portfolio to choose from.
This is what Acorns selected as my portfolio although you can change it whenever you want, depending on how much risk you would like to take with your investments.
You can choose how much you want to put into your account. In order for Acorns to start investing your account must reach a $5 threshold (you’ll get a free $5 if you sign up through this link). Acorns cost $1 per month for accounts less than $5,000, or 0.25% per year on those over that. But if you are a student, or are 18–23 years old, its completely free.
This is what the menu bar in Acorns looks like once you get everything set up.
Once you’re all set up and connected, you begin to customise. Here is how Acorns tells you to optimize your account.
You can also select round-ups how much you want to round up. I choose automatic so I don’t have to think about it. Once you reach a total of $5 in your roundup, it invests.
You can invest in five fund types, ranging from conservative, which puts most into cash and bonds, through to aggressive which has over 80% allocated to equities. At first I had mine in the very safe moderate setting, but I have since moved it up to aggressive because I want to see what the returns will be like over a few years.
Here is a “moderate” diversified portfolio. In this photo, it’s telling me that if I deposit on average $100 per month, my projected account value will be $17,107 by the time I turn 36. This will be a total of $5,000 in earnings.
This is also a “moderate” portfolio except this is the projected value by the time I turn 43.
The great thing about Acorns is that if you want to change your portfolio you can very easily.
A really cool feature is that if you sign up through this link, then you will automatically get a free $5. Plus, when you invite your friends, you’ll get $5 as well!
Final Thoughts About Acorns
Overall, I love Acorns to invest my spare change digitally. I have not had any issues with my account up to this point. While I have seen positive returns with my account overall, that does not mean you will. All I can say is that if you want to get into investing, then Acorns provides a low-cost, convenient, and fun way to put your extra change to work.
You can sign up for Acorns to receive your first $5 for free by using our link.
*I personally use Acorns but this review serves only as my personal opinion and not investment advice intended to promise any gains int he stock market. To learn more, you can read our full Disclosure Policy.
Originally published at Your Money Your Freedom.