Acorns Review - Save and Invest Your Spare Change
If you’ve been having difficulty saving money, and just haven’t been able to get into the investing habit, Acorns may be the solution to your problem.
- Fee is low for high balances
- Easy way to save money
- Free checking account
- Free for college students
- Great way to start investing
Acorns is one of the most diverse investment apps currently available. It’s part micro-savings app, part micro-investing app, and a full on robo-advisor platform. The app was only launched in 2014, but it already has more than 4 million users, and over $1 billion invested. That kind of participation speaks volumes about the value of the Acorns app.
Using your smartphone, you connect the app to either your bank account or a primary credit card. As you spend money the way you ordinarily do, Acorns will allocate a small amount to savings. They refer to this process as Invest your spare change, and we’ll get into that process in some detail in the next section.
As your savings collects, the money is automatically moved into an investment account. Since this requires just $5, Acorns is also a micro-investing platform. That’s when the Acorns robo-advisor enters the picture. With that small amount of money, a fully diversified portfolio is created for you, then fully managed going forward.
As you continue to spend money, additional funds are added to your investment account. But you also have the option to make regular deposits to ramp up your investing more quickly. And now you can even set up a retirement account through Acorns.
Simply put, since Acorns came into existence, there’s no reason not to save and invest money. The app thus far has primarily attracted Millennials, who are comfortable with using technology for ordinary activity, like spending. But it can really benefit anyone who has had difficulty saving and investing money in the past.
Let’s start with the savings side of Acorns. You can link one or more bank debit cards and credit cards to the app, and it performs what are known as Round Ups. That’s the key to the whole savings strategy, and why it’s a perfect savings vehicle for non-savers.
Let’s say you buy lunch at Taco Bell for $8.27. The Acorns app will charge your debit or credit card $9. $8.27 will pay Taco Bell, and 73 cents will be held for savings.
Once the savings portion has accumulated $5, the funds will be transferred over to your Acorns investment account.
If you make an average of 100 purchases per month, with an average of 50 cents going into your investment account with each purchase, you’ll be able to save and invest $50 per month. Best of all, this will happen without any deliberate action on your part. The savings and investing will be the automatic result of your normal spending activity. It won’t even take any discipline on your part.
Once in your investment account, the funds will be invested in a diversified portfolio, and fully managed by the Acorns robo-advisor. You can supercharge your portfolio by making regular contributions to the plan. This can be done by either recurring deposits or by one-time contributions–your choice.
The Acorns app is available at The App Store for iOS devices 10.0 or later, and is compatible with iPhone, iPad, an iPod touch devices. The Android version is available on Google Play.
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Though it’s only been around since 2014, Acorns has been steadily expanding the menu of features and benefits the app offers. Some of the more noteworthy ones include:
Round Up Multiplier. With regular Round Ups you round up your purchases to the nearest dollar. Then with a Multiplier, you can multiply the amount that goes into savings and investments. For example, if you choose to triple your Round Up, a 75 cent Round Up becomes $2.25.
Acorns Gift Cards. If you have friends or family members you want to introduce to Acorns, you can purchase Acorns gift cards for $25. They can either be purchased online, or at select retailers.
Acorns Spend. This is a checking account that includes a debit card. You can connect this card to your Acorns account, so you can also use it to fund the investment account with regular purchase activity. The account allows digital direct deposit, mobile check deposit, check sending, free bank-to-bank transfers, and unlimited free or fee reimbursed ATMs nationwide. There are no overdraft or minimum balance fees.
Acorns Grow. This is a resource page with articles and tutorials on how to grow your money. It’s part of Acorn’s plan to help non-savers become savers, by adding some education to the mix.
Found Money. Acorns partners with over 200 brands, like Apple, Blue Apron, Hilton, Samsung, Walmart and Macy’s. When you shop with these merchants, extra money will be added to your Acorns account. It’s a way to enhance your saving and investing activities.
Acorns Later. This is Acorns IRA account. It works similar to the taxable Acorns investment account (Acorns Core), but it’s specifically for IRAs. It can accommodate traditional IRAs, as well as rollovers from employer sponsored retirement plans into an IRA.
Acorns is a robo-advisor, and like other robo-advisors it invests based on Modern Portfolio Theory (MPT), which emphasizes asset allocation to both maximize returns and minimize losses.
The basic taxable investment account is Acorns Core.
Your portfolio is invested in exchange traded funds (ETFs) that are invested in broad market indexes. By using ETFs, your portfolio can be spread across thousands of individual securities through just a small number of funds.
The current Investment indexes, as well as the corresponding ETFs are as follows:
- Large companies, through Vanguard 500 Index Fund ETF Shares (VOO).
- Small companies, Vanguard Small-Cap Index Fund ETF Shares (VB).
- Developed market, Vanguard FTSE Developed Markets ETF (VEA).
- Emerging market, through Vanguard FTSE Emerging Markets ETF (VWO).
- Government bonds, through iShares 1-3 Year Treasury Bond ETF (SHY).
- Corporate Bonds, through iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD).
- Real estate stocks, through Vanguard Real Estate ETF (VNQ)
Acorns will invest your money according to five different portfolio allocations, based on your personal investment risk tolerance. The five portfolios are Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive.
The specific asset allocations in each portfolio are as follows:
|Asset Class / Portfolio||Conservative||Moderately Conservative||Moderate||Moderately Aggressive||Aggressive|
|Large Company Stocks||12%||24%||29%||38%||40%|
|Small Company Stocks||2%||4%||10%||14%||20%|
|Emerging Market Stocks||N/A||N/A||3%||4%||10%|
|Real Estate Stocks||2%||4%||6%||8%||10%|
|International Large Company Stocks||4%||8%||12%||16%||20%|
Once your portfolio has been created, it will be rebalanced periodically to maintain the targeted asset allocations. You also have the benefit of automatic dividend reinvestments, so your money will remain fully invested at all times.
Acorns has three pricing structures, based on three plan combinations:
- Acorns Core. This is Acorns basic taxable investment account. The fee for this plan is $1 per month.
- Acorns Core + Acorns Later. This is the combination of the basic taxable account, as well as a retirement account. The fee for this plan is $2 per month.
- Acorns Core + Acorns Later + Acorns Spend. This Plan combines the basic investment account, with a retirement account, and the Acorns Spend account, with it’s checking account. The fee for this combination is $3 per month.
There’s both good news and bad news with the Acorns fee structure. The bad news is that the fee is prohibitive on small accounts. For example, if your account has $100, and you’re paying $1 per month for the fee, that’s $12 per year. That’s a 12% fee, which is completely off the charts when compared to other robo-advisors.
But the good news is the fee is ridiculously low on larger account balances. Since you’re paying the same $12 per year for a $10,000 account, your annual management fee is just 0.12%. That’s well below the average among robo-advisors.
But that imbalance shouldn’t be seen as a negative. Instead, it should provide an incentive to build up your investment account as quickly as possible. After all, the purpose of investing isn’t to accumulate $100, or even $1,000. It’s to move well above those amounts.
And on higher balances, Acorns become incredibly competitive.
Acorns is free for college students. Acorns Core is free for college students. You must be enrolled either full-time or part-time. It’s Acorns way of attracting rising young investors.
To sign up with Acorns you need to be a U.S. resident, and at least 18 years old. You’ll start by entering your email, then creating a password. You’ll then need to agree to the Acorns Program Agreement and the Auto Debit Authorization.
Next, you’ll determine your Round Up setting. You can either round up to the next dollar, or use the Round Up Multiplier to multiply the round up–all the way up to 10 times the regular Round Up amount.
You’ll then be required to provide the standard information needed to open a financial account, including your full name, physical address, and Social Security number. Finally, you’ll choose your investment profile, from one of the five offered by Acorns.
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Acorns Securities is an SEC-registered broker-dealer, and a member of both FINRA and SIPC. That means your account is protected for up to $500,000 in securities and cash, including up to $250,000 in cash.
Platform security includes 256-bit Secure Socket Layer (SSL) encryption, bank level security, account alerts of unusual activity, and account safeguards, like multi-factor authentication, automatic logouts, and ID verification to prevent unauthorized access to your account.
This is a limitation with the Acorns app. No phone contact is available. You can only connect with customer service via email, which is done directly through the website. They disclose that the response time is one to two days, due to high demand.
Pros and Cons
- The fee of $1 per month is a real bargain as your account balance grows. On a balance of $20,000, the fee is just 0.06% per year, which is very close to free!
- You can save money by spending money, which is probably the very easiest way to save money in any form.
- Acorns spend gives you a free checking account to go with your investment account.
- You can start investing with just $5, which makes the app perfect for new and small investors.
- Acorns Core is free for college students.
- Acorns may be the best app on the market to turn a non-saver/non-investor into a committed saver/investor--and without doing anything different to get there.
- On lower account balances, the $12 annual fee can take a big chunk out of your portfolio. $12 is a lot of money to pay for the management of a $100 portfolio.
- Customer Service is limited to email. They even disclose the response time is one to two days. And there was no phone contact available.
Question: Is the Acorns Spend account covered by FDIC?
Answer: Yes, the account is fully FDIC insured, which means you’re covered up to $250,000 per depositor.
Question: Does Acorns require a credit check to sign up for the app?
Answer: No, no credit check is required, not even for the Acorns Spend account and debit card.
Question: How can Acorns build a portfolio for me with as little as $5?
Answer: A big part is the use of exchange traded funds. These are low cost, index-based funds, that invest in hundreds of individual securities. Because you can purchase them like stocks, and in any amount, you can build a fully diversified portfolio using up to seven different ETFs. This will provide you with an asset allocation that includes both foreign and domestic stocks, real estate stocks, and even government and corporate bonds.
Question: Does Acorns offer a Roth IRA option?
Answer: Not at this time, but Acorns is an investment app that’s evolving rapidly. After all, it’s only about four years old, and it’s gone from being a micro-savings app to a full on robo-advisor, with various financial options typically seen in much more well established platforms.
Overall, probably the best feature of Acorns is the ability to accumulate savings passively, through Round Ups. But if you’re able to save small amounts of money, and don’t have a need for an app that saves money through spending activity, there are other choices.
Stash Invest is a micro-investment app, similar to Acorns. They don’t have anything like spending round ups, but you can invest in increments of $5. They have a similar advisory fee to Acorns, at $1 per month, but at $5,000 that drops to 0.25%. From that point forward, the advisory fee will be lower than what Acorns charges.
Betterment is a full on robo-advisor. But they have no minimum initial investment requirement, and you can fund your account with regular contributions. They have a fee of 0.25%, which will also be more cost effective than Acorns at any portfolio amount.
Similar situation with Wealthsimple. It’s a robo-advisor that allows you to open an account with no money upfront, and then to fund your account with regular contributions. The advisory fee is the same as Betterment’s, at 0.25%, and the platform specializes in socially responsible investing.
For more advanced investing, check out M1 Finance. Not only is it a robo-adviser, with no minimum initial investment, and an annual fee of 0.25%, but you can also choose the investments held in your portfolio. In fact, you can even create multiple portfolios.
If you’ve already established a pattern of saving and investing money, you may find Acorns has only limited appeal–perhaps mostly as an app that will help you save and invest at an even higher level.
But Acorns has been designed primarily for young, non-savers. It plays on the idea that everyone, including non-savers, spends money on a regular basis. By allocating small amounts from that spending to savings, the non-saver can begin saving and investing money effortlessly.
At a minimum, Acorns is an outstanding app to begin saving and investing with. And once your investment account begins to grow, you can consider moving into other types of investing, like self-directed investing. But if you haven’t been able to get out of the investing starting gate, this app is made to order for you.
If you’d like more information, or if you’d like to sign up for the app, visit Acorns here.