Little expenses we ignore on a day-to-day basis can cause a leak in our long-term savings. However, there’s good news. Acorns can help take care of that.
This post will give you a detailed insight into how Acorns works, its benefits, and its various investing strategies. Most importantly, what is Acorns, and is it right for me?
ACORNS PROMOTION FOR NEW USERS
Sign up and get a $10 bonus with this link.
Why Use Acorns App To Save Money?
Saving money can be just as difficult as earning it, especially in today’s ever-evolving economy. With the endless slew of amazing products beautifully advertised and thrown in your face, it can take a lot of self-control to hold back on your spending.
A person who saves wisely puts themselves in the best position to build wealth in the long run. Sometimes though, it’s the little purchases that prove themselves to be the biggest challenges. This is where Acorns comes in handy. It collects and saves a bit at a time for you, so you don’t have to do all the mental work.
What Is the Acorns App?
Acorn is a micro-investing platform and a Robo-advisor that is aptly named after the following proverb:
“Mighty oaks start as small acorns.”
It helps take a lot of the stress off investing by automating it and doing it little by little. The goal is to not feel the burden of huge chunks of investment at a time.
The Acorns app helps you manage your savings with a monthly fee of $1 to $5, depending on the tier you get.
What Is The Minimum To Invest With Acorn?
The biggest advantage is that Acorns requires a very small minimum deposit of $5, whereas other Robo-advisers require at least $500 to get started. It’s by far the easiest barrier to entry to invest and was set up that way intentionally.
What to keep in mind
As with any Robo-investing app, there’s a fee. Usually, it’s a set percentage. For example, Wealthfront and Betterment charge a fee of 0.25% of the amount invested each year. With Acorns, there is no set percentage fee, only flat monthly fees based on the subscription plan you choose.
This is important because in the beginning, when you’re starting out with Acorns, the monthly fee as a percentage of the amount invested will be relatively expensive. As you start to gain more in your investing account, the percentage gets smaller and smaller in relation to the fee.
For example, if you’re on the $3 a month plan and have a total of $100 being invested in your account:
12 months x $3 = $36
$36 / $100 = 36%
That’s a whopping 36% fee!
However, if you get to $10,000 invested:
$36 / $10,000 = 0.36%
That cost went significantly down to a 0.36% fee.
And it continues to get smaller the higher you scale up in your investment accounts.
How Do You Set Up An Acorns Account?
All you’ve got to do is head on over to the Acorns website or mobile app and click on “Get Started”. You’ll find that 8+ million people are already signed up. If you’re going for the mobile app, you can easily find it available in the Apple store as well as on Google Play.
When you sign up for the Acorns investment app, you’ll be filling out a small form and giving details about your saving goals, monthly income, and employment. You’ll also have to link your bank account to the Acorns saving account. Your personal Robo-advisor, Acorns, will then concoct the perfect investing plan based on your financial goals and risk tolerance.
How Does Acorns Work?
With the Acorns app, every time you make a purchase using your credit or debit card, Acorns automatically rounds up that purchase to the nearest dollar, and the spare change gets transferred from your linked account into your Acorns investment account.
This allows you to set aside money automatically with everyday purchases like coffee, food, mobile phone charges, etc.
If you want to invest a bit more, you can set up recurring contributions which enable you to regularly deposit money into your Acorn account. These amounts can be as little as $3 per day, week, or month. You can also deposit and withdraw a lump sum amount manually anytime you’d like.
Acorns Investment Portfolio
An Acorn portfolio is based on your type of investment, time horizon, and risk tolerance. Generally, their investments are modeled after the Modern Portfolio Theory. This ensures that the risk taken on by the portfolio is minimized as much as possible in order to achieve the investor’s goal.
Acorns App Subscription Plans
Acorns offer three tiers of subscription plans tailored to your preference, financial goals, and investing style. The tiers are Acorns Lite, Acorns Personal, and Acorns Family, each having different features and fees.
Remember, if you plan on signing up, be sure to use this link to redeem your $10 bonus!
Acorns Lite (No Longer Available)
Update: As of September 2021, Acorns has done away with this $1 subscription plan. Users who previously had this have been bumped up to Acorns Personal at $3 per month.
Acorns Personal is an all-in-one investing plan. It comes with a monthly fee of $3.
Its famous feature, Round-Ups, used to be a sole feature in the Acorns Lite plan, but as mentioned above, that’s been done away with as of September 2021.
To recap the feature, the app allows the user to invest the leftover change to the nearest upper dollar amount with each purchase.
If, say, you buy a coffee for $4.62, Acorns rounds up this purchase to $5 in your linked account. It then transfers the remaining $0.38 into your Acorn investment account. This may not sound huge, but you’ll be surprised how quickly these little transfers add up. Your spare change money will grow to quite a hefty amount before you know it.
In addition to Round-Ups, the Acorns Personal plan includes 2 more features in its setup:
First off, it has the Acorns Later feature, which is basically a retirement account as the name suggests. It works the same way with Round-Ups, but you’re able to invest it in a tax-advantaged account. The accounts you can open up include a Roth, traditional, or SEP IRA.
Secondly, Acorns Personal offers Acorns Spend. This feature enables the user to open an FDIC-insured checking account under Acorns along with a debit card, and allows spending with the linked debit card.
It also comes with the bonus opportunity of saving money with discounts and cashback offers from partnering companies like Apple, Nike and others.
Acorns family has all the elements of Acorns Personal; however, it has the additional benefit of involving your kids in the investing process. You will have access to a Custodial Account to manage your kids’ subaccounts. Custodianship of the account falls under your control until your kids reach 18 years of age. From then onwards, they can access the account on their own behalf.
How Does Acorns Make Money?
Acorns makes money off their app mainly through their subscription plans. Additionally, Acorns can make money in the usual way banks make their money. For anyone participating in the Spend plan with a debit card, Acorns will make money off interchange fees transacted via Visa. Furthermore, any money sitting in an Acorns banking account may be invested by Acorns within federally regulated banking limits.
Free Acorns Accounts For Students
Of note, if you’re in a school that provides an .edu email address, you have the option of applying for a free account. This free-of-cost Acorns account will last until you turn 24 years of age, at which time you’ll have to sign up for a subscription plan to continue.
Mobile Benefits Of Using Acorns
Acorns is a widely used app for investment purposes. Its user-friendliness is prominent on its mobile app. You’d be hard-pressed to find another investing app this easy to use on mobile.
However, there is another app that we do think is comparable, and that app is Stash. If you’re interested, we have a head-to-head comparison on Acorns vs. Stash.
Users getting started on their investing journey will have no problem getting around the app interface. It’s especially helpful that Acorn has prioritized user-friendliness with an automated, easy-to-understand investment strategy It suits anyone wanting a fast setup and seamless experience due to busyness or lack of time to focus on investments.
Apart from being convenient, Acorns also provides educational insight into important investment concepts in simple layman’s terms.
Accessible on the Go
With the entirely automated Acorns app, you don’t have to worry about transferring the money on your own. Every Round-Up is executed by the app itself. Since everybody spends money almost always on a daily basis, tapping into the app can give you a fresh hit of dopamine. Every time you open the app, anytime, anywhere, you’ll be seeing your investment total consistently growing over time.
Great Custodial Account for Kids and Teens
The acorns app can be extremely beneficial for kids and teenagers who have trouble saving and utilizing their pocket money effectively. Saving and investing their own money can give kids and teens confidence and a sense of responsibility.
Easy Recurring Contributions:
If you aren’t a shopaholic but still want to save and keep track of your money, Acorns gives you the option of Recurring Contributions. Acorns can help you set up a daily, monthly, or annual plan for your recurring investments depending on your savings target. You can set recurring contributions as little as $5 per day. It’s a set it and forget it sort of deal.
You’ve got to save money when you can. The rich get richer because they pay themselves first. In today’s world, it can be very arduous and mentally draining to have to remind yourself to save and invest. For those who are looking to automate this process and dip their feet into the world of investing, Acorns can be a life-saver. It’s especially great because of the super low barrier to entry.
If you feel Acorns is right for you, be sure to sign up using this link to redeem your $10 bonus and start saving money. Remember, a penny saved is a penny earned.