Acorns - Use you Spare change to invest in your Future

Investing for savings is the best we can do,  for many of us, investing can seem overly complicated and somewhat intimidating if you don’t know the ins and outs. Acorns app intends to simplify and demystify this process through a revolutionary mobile app.

The app was created with the intention of removing any mental roadblocks or anxiety about becoming a regular investor. Using the Modern Portfolio Theory, it recommends optimized portfolios and keeps them on track with automatic rebalancing and dividend reinvestment.

How Does Acorns Work?

Acorns is a smartphone app that “rounds up” your spending to the nearest dollar and invests that difference. You link a credit card and checking account, and Acorns does the rest. This microsavings service makes investing almost painless because you are spending only pennies at a time.

The Acorns app is targeted at a much younger, more tech-savvy generation (Millennials) since the entire investment experience is created and managed from a smartphone. Acorns recently unveiled a web-based version for desktop and portable users, as well.

Essentially, this app is a great starting point for anyone who hasn’t invested yet or needs a bit of guidance in the beginning.

GET $5 WHEN YOU SIGN UP FOR ACORNS

Acorns Fees & Features

Minimum Investment	$0
Fees	$1/month under $1 million; 0.25%/year over $1 million; FREE for under 24 and in college; IRAs are an additional $1/month; $3/month for Spend and Later
Mobile Access	iOS App, Apple Watch, Android App
Website Access
Accounts	Taxable Joint Roth IRA Traditional IRA Rollover IRA Custodial SEP IRA SIMPLE IRA 401(k) Solo 401(k) Trusts Limited Parternships Partnerships Non-Profit 529 Coverdell Annuities Checking Savings Money Market CDs
Promotions	Get a $5 Bonus When You Sign Up

• Round-Ups — For each credit card transaction, the Round-Up to the nearest dollar is invested into an Acorns account. Read more about how Round-Ups work
• Scheduled Deposits — Set recurring daily, weekly or monthly investments.
• Found Money — When you shop with Acorn’s Found Money partner brands — which currently include Apple, Airbnb, Blue Apron, Macy’s and Warby Parker, among others — extra money will be added to your Acorns account. Read more about Found Money here
• “Learn” — Acorns includes an education section that includes investing basics, FAQs and a glossary.
• “Grow” — Interviews, news and how-tos are available on the website or within the app.
• “Potential” — This new tool allows users to see the impact that a theoretical additional investment (daily, weekly or monthly) would have on their account.
• Round-Up Multiplier  — Instead of just rounding up to the next dollar, users can now multiply the extra investment by two, three or 10.
• Acorns Later  — Acorns users can invest in a specially designed individual retirement account (IRA). Acorns Later costs an additional $1 per month until the user has invested $1 million with Acorns. After reaching that milestone, you’ll be charged a fee of $100 per million dollars.
• Acorns Gift Cards  — Now at participating stores and online, purchase $25 digital Acorns gift cards. This is a great option for getting a friend started with this service.
• Acorns Spend  — Acorns is rolling out Spend, a checking account with a debit card that applies Acorns and Acorns Later investing functionality to every purchase you make. Spend lets you instantly do real-time Round-Ups, as well as automatic retirement savings and extra savings via Found Money. You can also invest up to 10% of your everyday purchases from local retailers that are not enrolled with Found Money. The debit card is offered through Visa, and you can use it at free and fee-reimbursed ATMs across the country. Spend accounts are FDIC insured up to $250,000. Spend accounts cost $3 per month.

How Round-Ups Feature Work

Once your account is approved, Acorns will withdraw the initial deposit and your account will be ready for investing. The Round-Up transfers come from monitoring your linked account and rounding up the purchases to the nearest dollar.

For example, I spent $22.43 at the gas station this week, and 57 cents was added to my Round-Up balance. Once the Round-Up total reaches $5, the money will be withdrawn from my bank account and added to my Acorns investment.

You can choose which transactions you want to include in your Round-Up amount or set it to “automatic,” in which case Acorns will apply the feature to all eligible purchases.

In the spring of 2017, a new update brought an important new feature to the Round-Up system. Now users can elect to boost the amount of their Round-Up by as much as 10 times. So instead of pitching in just those 57 cents from my gas station purchase, I can elect to invest as much as $5.70 for that transaction automatically. The potential to magnify your savings is enormous.

Additionally, you can deposit cash reward bonuses from your bank or other rewards programs that you currently have. Or you can choose to invest lump sum amounts in addition to your Round-Up deposits. If you prefer, you can set up recurring deposits on a daily, weekly or monthly schedule.

CFO Mark Dru explains:

“You can also invest up to $20,000 or $30,000 in a lump sum investment, so we’re not only attracting investors interested in doing the Round-Up, but more sophisticated investors as well.”

Acorns is similar to Bank of America’s Keep the Change program, which rounds up purchases made with your debit card to the nearest dollar and then moves the difference into a savings account. With Acorns, however, the money goes into an investment account with the intention of long-term savings and growth potential, rather than a simple savings account.

If you’d like more information about using Round-Ups and other features in the app, check out our guide to maximizing Acorns, here.

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Found Money Feature

One of Acorns’ unique features is Found Money. With this feature, every time you use an Acorns-linked credit or debit card at a retailer from the list below, that retailer will contribute an extra amount into your Acorns account.

Here’s a list of the current Found Money participants and the amount they’ll contribute (as of March 2019):

Company	Discount
Airbnb	1.8% of your service fee
Barnes & Noble	2% of your purchase
Billshark	$10 when you sign up
Blue Apron	$30 when you sign up
Boxed	4% of your purchase
DirecTV	$25 when you sign up
Dollar Shave Club	10% of your purchase
Earnest	$100 when you refinance your student loan
Expedia	4% of your purchase
Groupon	5% of your purchase
Liberty Mutual Insurance	$5 per auto or home insurance quote
LifeLock	$25 with a new purchase
Lyft	$15 when you sign up as a driver
Macy’s	5% of your purchase
MeUndies	20% of your first purchase
New Balance	5% of your purchase
Nike	5% of your purchase
Sephora	$3% of your purchase
Stich Fix	$10 with a new purchase
Walmart	$5 with a new subscription
Warby Parker	1% of your purchase

Creating an Acorns Account

Signing up for an Acorns investment account is a relatively easy process and starts with or downloading the app for free from iTunes, Amazon or Google Play stores. The app is available for iPhone or Android mobile devices.

The three-step signup process starts with entering a PIN access code, which you will use when you log into the app in the future. Creating an Acorns account is currently available only to U.S. citizens.

1. Choose a Round-Up Account

Your Round-Up account is the one that you will monitor; choose which transactions you want to round up and invest the change. Choose from the most popular banks, including Chase, BoA, Citibank, Wells Fargo, U.S. Bank, USAA, etc. If your bank isn’t listed, just click the “Next” button and type your bank’s name in the search bar.

Then you’ll be prompted to log into your bank using your online sign-in credentials. Next, click the account you’d like to use in your round-ups. You can connect more than one account if you’d prefer.

2. Connect Your Checking Account

Your checking account is different from your Round-Up account (this was confusing to me at first too) and is the account from which funds will be transferred into your Acorns account. Connect an existing checking account from the list and sign in using your online credentials, or input your routing and account numbers manually from a different bank.

It took several minutes for my Chase Bank account to sync using my online ID and password. And don’t worry about connecting your banking information, because Acorns encrypts and protects all of the data with bank-level security.

3. Create an Investment Account

You’ll be asked to type in your first and last names, phone number and birth date and to choose a security question/answer. Then it’s time to fill in your address and check if you’re a U.S. citizen or not.

Next, you’ll be prompted to answer three questions:

1. Are you or have you been affiliated with a broker-dealer?
2. Has the IRS notified you of being subject to backup withholding?
3. Are you a 10% shareholder of a publicly traded company?

If none of these apply to you, just leave them unchecked. These are standard questions required by the SEC when you open any brokerage account.

The next screen will prompt you to fill in your employment information, net worth, yearly income and your reasons for investing. The answers to these questions will help Acorns generate customized advice and a recommended portfolio created by its team of experts, including a Nobel Prize-winning economist.

You can choose from five different reasons for investing:

• Long-term investment
• Short-term investment
• Major purchase
• Children
• General

Finally, you need to fill in your Social Security number, which, according to the app, is used for ID verification, tax reporting, and fraud prevention.

Once you check all the signup boxes in green, click the “Get Started!” button.

Investing with Acorns

Logging into the Acorns app allows you to view your portfolio, check the performance of your index funds, see what the market is doing, and much more.

Jeff Cruttenden, the co-founder and COO of Acorns says:

“We focus less on beating the market and more on index portfolios where we can capture the market and keep fees low.”

Within your preset investment portfolio, the Acorns app gives seven options for basic index funds offered through iShares and Vanguard.

Asset Class	ETF	Ticker
Large Company Stocks	Vanguard S&P 500	VOO
Small Company Stocks	Vanguard Small-Cap	VB
Developed Markets	Vanguard FTSE Developed Markets ETF	VEA
Emerging Markets	Vanguard Emerging Markets Stock	VWO
Real Estate	Vanguard REIT	VNQ
Corporate Bonds	iShares iBoxx$ Investment Grade Corporate Bond	LQD
Government Bonds	iShares 1–3 Year Treasury Bond	SHY

It is important to note returns are not guaranteed, and it is possible to lose principal. Acorns invests in the stock and bond markets and is not FDIC insured, although investments are SIPC insured. At the time of this article update, Acorns has more than $800 million in assets under management.

Acorns Available Investing Portfolios

After the signup process is complete and you’ve created your investment account with Acorns, the app will process your portfolio. Simply view your portfolio to see a list of advice, tips, and ideas.

The Moderately Conservative Portfolio was recommended for me, based on my variable cash flow (as a self-employed taxpayer), a median net worth, my long-term investment reason, my age, and my above-average income. However, I chose to go with a Moderate Portfolio for the purpose of this review.

To see a change in projected value over time, you simply drag the graph (either right or left and up or down) to change the amount invested each month. You don’t have to stick with the recommended portfolio. Just click on the different types of portfolios to find one that’s a better fit.

There are five portfolios to choose from:

Portfolio	Stock %	Bond %	Real Estate %
Conservative	18%	80%	2%
Moderately Conservative	36%	60%	4%
Moderate	54%	40%	6%
Moderately Aggressive	72%	20%	8%
Aggressive	90%	0%	10%

Next, you can explore the ETFs and select an asset class you want to invest in. When you’re ready, simply click “Confirm Portfolio.”

Is Acorns Safe & Worth It?

There are no deposit or account minimums to maintain, no commission fees and no penalties when withdrawing funds. Acorns’ fees are now $1 per month for your first $1 million, or 0.25% annually for accounts greater than $1 million. If you wish to use Acorns Later, you will be charged an additional $1 per month until you’ve invested $1 million. Then you will see a fee of $100 per million dollars. Adding Acorns Later will raise your starter fee to $2 per month, and Acorns Later PLUS Acorns Spend will run you $3 per month. (Acorns receive its fees by withdrawing them from your funding source, rather than taking it from the money you have invested.)

To be completely honest, when you use Acorns, if you’re investing only tiny amounts here and there, you run the risk of losing out to fees. The $1-per-month rate is high relative to some other investing options. Let’s say you make only two purchases with your Acorns-linked account per day with a Round-Up of, say, 20 cents per time. That’s about only about $12 invested per month. In this case, $1 represents 8.33% in fees — significantly higher than robo advisors such as Betterment, which charges 0.25% annually. Click here to see other recommended robo advisors

Of course, if you’re a frequent card user who makes many more purchases per day, Acorns starts to make a bit more sense. Plus, there are several ways to maximize your experience and boost your savings.

Free for College Students

Acorns is targeting the younger generation with a great deal — no fees on any accounts of any size for college students. You must have a valid .edu address and employment status as “Student” for up to four years from the date of registration.

Pros and Cons

Pros

• Painless Way to Save — Since the amounts taken out of your account are small, you won’t notice them missing from your checking account.
• Hides the Complexities of Investing — You don’t need to understand Modern Portfolio Theory to use Acorns.
• Start Investing With No Money — Acorns doesn’t require a minimum deposit to start using the service.
• Free for College Students — To attract young savers/investors, Acorns is free to use for any college student for the first four years.

Cons

• Only for "Boosting" Your Savings — Acorns savings amounts aren’t really suited to save the 5% to 20% annually you need to put toward retirement or larger goals.
• Can Lose Principal — It is possible to lose money with Acorns, although the recommended investments are pretty conservative.

Summary

For the microsavings category, we think Acorns is the best service available.

Acorns is a good start if you have little to save or need a nudge to start investing without affecting your lifestyle, although the monthly deposits are way too small to be considered a serious method for saving toward retirement.

Betterment is a better option for larger deposit amounts with lower annual fees. In response to Acorns’ microsavings service, Betterment has SmartDeposit, automating investing once your bank account is above a specified dollar amount.

However, there is nothing stopping you from using both services to boost your savings rate. Ultimately, most individuals don’t save enough for a rainy day, and Acorns will help start you down this path.