Acorns Review – Investing Spare Change With An App

happy acorns review

Acorns Review – Building Wealth Through “Round Ups”

Benjamin Franklin once said “a penny saved is a penny earned”. You know what it means; saving money you already have is just as valuable as earning more money.

But Benjamin Franklin didn’t foresee that one day, you could eventually do both at the same time with ease.

Thanks to Acorns’s philosophy of investing your spare change, a penny saved is now a penny invested, which will earn you more than just another penny.

However, is Acorns worth signing up for? Can it help you build wealth passively without straining your finances too much?

Read the full Acorns Review below to find out all the details.

What is Acorns?

Acorns is a micro-investing app run by a company by the same name. It was created in 2012 by father-son duo Jeffrey James Cruttenden and Walter Wemple Cruttenden III to promote incremental investing.

Acorns merges robo-advising with automated savings. It’s known as the “invest your spare change” app thanks to its Round-Up feature, which takes your spare change from purchases and invests it. Other automation features include automated investments and Found Money.

For the savvy saver or investor, they offer retirement and checking accounts as well.

While not the most involved robo-advisor/investment app, Acorns will serve a variety of investors well. Keep reading this Acorns Review for the full details on this app.

Acorns’s Features

Investment Offerings

Acorns offers 5 portfolios of varying levels of aggressiveness:

When you first sign up, Acorns collects information regarding your age, income, financial goals, and time horizon; it then suggest you a portfolio based on that information. You can then change your portfolio later if you decide you want to be more or less aggressive in your investing.

That being said, all of their portfolios are made up of ETFs representing several different asset classes:

While not the largest selection of investments, Acorns takes a lot of the work away from you by narrowing down your potential investments.

Automated Investing

Acorns is all about taking the work off your shoulders in investing. Aside from doing the work and picking a portfolio for you, Acorns lets you set up regular, automatic transfers as low as $5 from your checking account to your Acorns account.

But that’s not the best automation feature Acorns has…

Round-Ups

Acorns follows through on its “invest your spare change” philosophy with their Round-Up feature. Round-Ups take your spare change from purchases (aka the amount required to reach the next dollar) and invests it into your Acorns account.

Round-Ups are typically done automatically. However, Acorns does let you do Round-Ups manually. You’ll just approve each Round-Up whenever you make a purchase.

Anyways,

To illustrate Round-Ups, say you fill up your car’s gas tank for $34.59. Acorns will draw $0.41 ($35 – $34.59) from your linked checking account and funnel it towards your Acorns investment account.

Now, Acorns does this in increments of $5. It tracks your Round-Ups until you reach $5, then it transfers it all over. Alternatively, you can transfer your Round-Ups sooner by having your checking account make up the difference between your Round-Up “balance” and $5.

So if you have $4 in Round-Ups and go with this option, Acorns will move another dollar from your checking to your Acorns account.

The goal of Round-Ups is to take more of the psychological burden of watching your money leave your checking account. You won’t ever notice/miss a few cents here and there, yet over time, those investments can compound and make a difference in your wealth-building.

Found Money

What’s even better than rounding up each dollar and investing the spare change? Free investment capital for shopping!

Acorns’s has partnered with over 350 companies to offer you cash back for your Acorns account when you shop, including many big names like

Each store has a different cashback rate; some offer percentages, while others invest fixed dollar amounts. More expensive or complex services (Lifelock was one we saw) pay you up to $25 for signing up with them!

To take advantage of Found Money, simply link as many bank accounts and cards as you want, click through to the Found Money store of your choice on the Acorns app, and make your purchases.

You can also download the browser extension to spot offers as you shop all over the web.

Found Money takes 60-120 days to show up in your account, but you can track your Found Money status in the History screen on the Acorns app.

Educational Content

Acorns aims to help beginner investors learn investing. Their website and app do this quite well by clearly defining complicated investment jargon.

In addition, Acorns published Grow Magazine. Grow Magazine is a millennial-focused personal finance site that discusses topics like

You can find some “introduction to Acorns” types of articles on Grow Magazine as well.

Referral Program

Acorns has a nice referral program where you earn $5 per referral. Each of your referrals earns $5 for signing up through your referral link.

They also seem to run referral promotions every so often. In October 2019, they paid a bonus $100 to anyone who invited at least 3 friends. The prior month, it was $150 for 3 successful invites.

All the more reason to encourage friends and family to start investing!

Acorns Account Types

Acorn’s has a few account types. They all work pretty well together.

Acorns Invest (Taxable Investment Account)

Acorns Invest is the fancy name for Acorns’s normal investment account. You can choose from one of Acorns’s portfolios and invest like normal.

Acorns Later (Retirement Account)

Acorns Later is Acorns’s retirement account. It’s essentially an IRA tailored to your planned retirement lifestyle and goals.

If you didn’t know, IRAs are tax-advantaged retirement accounts. There are two types: traditional and Roth IRAs. Traditional IRA contributions are pre-tax, but withdrawals are taxed. Roth IRAs are the inverse; contributions are done after taxes, but withdrawals are tax free.

Back to Acorns…

Acorns Later collects a few pieces of information from you, then suggests an IRA to you based on your answers.

As you can see, it’s almost the same as Acorns Invest, but geared towards retirement.

Similar to Acorns Invest, Acorns Later requires only $5 to start investing in your IRA.

Young investors, think about starting your retirement savings early with an Acorns Later IRA.

Acorns Spend (Checking Account)

Acorns Spend is Acorns’s checking account. It is FDIC-insured up to $250,000 just like any other bank account.

Some of its features include

Speaking of that debit card, using it can earn you Found Money cashback on top of the normal Found Money you’d earn through shopping with your linked card.

In addition, Round-Ups are performed instantly since you’re moving money between Acorns accounts. No waiting to build up $5; your money gets into the market sooner, meaning your money has more time to work for you and make you even more money.

All of those features cost only $3 per month. Really, that’s $1 per month per account since you get a Core and a Later account.

The one downside is you can withdraw a mere $500 per day. Not a huge issue for most, though.

Acorns’s Fees

Acorns Invest costs $1 a month for balances up to $5,000, then 0.25% per year for balances $5,000+.

Upgrade to Acorns Later, and you’ll spend $2 a month (but you get an Acorns Invest account); Acorns Spend costs $3 per month (but you do get the other two accounts).

None of those sound like a lot, but it ends up being a high percentage for investors who’s balances aren’t very large. Since Acorns is a micro investing app, that’s bound to be a lot of investors.

Here’s an example: say you have $100 stuffed away in your Acorns Invest account. At $1 per month, you’ll be paying $12/year, or 12% on that $100.

Most of the time, management fees are in the 1% or less range. So a 12% fee is gigantic, even if it’s only $12 per year.

Such a large fee could counteract many of your investment gains. Build up enough, however, and the fees start to feel more manageable.

Student Discount

Acorns’s target market is young investors; a large swath of said target market is college students. Acorns offers college students 4 years of fee-free Acorns Invest when they sign up with a .edu email address.

With the fees out of the way, there’s no reason not to sign up, even if you don’t want to allocate some of your precious student budget towards monthly Acorns investments. No matter how little money you have, you won’t notice the rounded up money disappearing from your checking.

But of course, there’s Found Money too. Take advantage of both Round-Ups and Found Money and you’ll have yourself a nice investment fund by the time you walk at your commencement.

The Verdict

Acorns is a great investment app for investing beginners, passive investors, and investors without a lot of investment capital. It does a lot of the work for you through automation and investment limitation, leaving you to just spend your money and accumulate wealth.

Found Money’s not a bad feature for loading up your investments, either.

Acorns isn’t for you if you desire more control over your investments or if you have a lot of wealth already. It simply doesn’t give you a large selection of investments, something that wealthier people might want in order to take maximum advantage of their money.

For that, there are a few better options.

Wealthfront

Wealthfront is a good alternative to Acorns for investors who want to get more involved in their wealth-building. They offer ETFs from 11 different asset classes, as well as stocks for those with larger accounts.

One of their best features is their tax harvesting. Every day, Wealthfront performs tax loss harvesting on all taxable accounts. If you reach over $100,000, it does something called “direct indexing” to take advantage of tax loss harvesting on stocks.

See, ETFs are individual securities representing a bucket of assets. Direct indexing involves actually buying said assets to mimic the ETF. Instead of buying a share of ETF X that tracks stocks A, B, and C, you buy stocks A, B, and C.

And so, Wealthfront harvests tax losses on those stocks and reinvests the proceeds.

Wealthfront’s fees are a lot lower than Acorns’s, sitting at 0.25% per year.

Now, Wealthfront does require at least $500 to be in your account at all times. This shouldn’t be an issue for more seasoned investors, though.

Betterment

Betterment, a leading robo-advisor, operates with a goal-based philosophy. They offer you a large selection of ETFs to invest in, many more than Acorns’s selection.

Betterment’s charges the same 0.25% annual management fee for their free account (the Digital account) that Wealthfront charges for a subscription.

Betterment even has a feature like Round-Ups called Two-Way Sweep. The app analyzes spending habits, then moves what it deems to be excess money to your investment account.

Other features include

How to Create an Acorns Account

Creating your Acorns account and making your first investment isn’t too hard. Here’s how to do so.

1.) Sign Up

Acorns requires a valid email address and password to sign up. Either navigate to their website or download their app, provide your email, and create a strong password.

The mobile app also lets you create a 4-digit PIN that lets you skip entering your username and password when you log in on your phone. If you minimize the app but leave it open, it’ll require your PIN again to log back in for your security.

2.) Link Your Accounts

Linking your accounts is the key to getting the most out of Acorns through Round-Ups and Found Money. At a minimum, you must link a checking account to provide funding for your Acorns account. This checking account will also be used for Round-Ups.

Then, you can link as many debit or credit cards as you want for Round-Ups and Found Money.

To link your checking/credit/debit accounts, Acorns will have you enter your login information for each respective account. It’ll then pull that information into the app so you can earn Round-Ups and Found Money.

3.) Investors Questionnaire

The initial investor questionnaire is used to determine the best of Acorns’s 5 portfolio strategies for your specific situation. First, Acorns collects some regulatory information, such as whether or not you’re a broker dealer or if you own 10% or more/are a director of a publicly-traded company.

Then you move on to the good stuff. Acorns asks for data regarding your age, current income, retirement goals, risk tolerance, and more. It then processes this information and picks a portfolio they think would work best for you.

All in all, the questionnaire takes only a minute or so.

4.) Pick Your Portfolio

Pick the portfolio Acorns recommended to you if you feel it’ll meet your investing goals.

Not satisfied with Acorns’s recommendation? Don’t worry, you can change which portfolio to follow whenever you want.

5.) Fund Your Account

Acorns doesn’t require any minimum deposit to open an account, but you need at least $5 in your account to invest in your portfolio.

Acorns suggests amounts of $5, $20, $100, and $250, but you can fund as much as you want initially as long as you have that $5 to invest.

6.) Start Investing

Once you’ve funded your account, it’s time to start investing! Round-Ups will happen automatically; Found Money will as well, as long as you purchase through Acorns’s app/site or use their browser extension.

However, you should set a recurring deposit if you’re serious about building wealth on Acorns. You can set a daily, weekly, or monthly deposit.

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