Acorns: Investing Your Spare Change

Acorns: put your spare change to work in the stock market!

Note: I don’t get paid for making these recommendations, these are actually just stuff I’ve found that I think is cool and want to share with you!

Those of you who have been with my blog for a little while might remember when I talked about Digit, a cool little application that squirrels away your extra money, a few dollars and cents at a time, into a savings account. In that same vein, I recently discovered an application called Acorns. In the same spirit as Digit, Acorns (currently a mobile app, with a web application on its way very soon) pulls small amounts of money from your accounts over time. However, instead of depositing it in a plain-old savings account, Acorns invests it.

How does this work?

Acorns works by rounding up your transactions to the nearest dollar, and using that extra money to invest. Many banks already do this, instead pulling the money into a savings account. In the case of Acorns, you’ll link your external account (think credit card or checking account) to the app, which will monitor your transactions to find opportunities to round up. When it finds such an opportunity, it will pull money from your linked checking account funding source after the total round-ups amount to a certain minimum ($5 is the lowest it can withdraw, but you can also set this threshold higher). This keeps it from making hundreds of little two-cent transactions, which is great for keeping things uncluttered.

Is this really useful?

Let’s be honest, it’s not going to make you a millionaire. However, if you need a little push to start investing, this is it. Acorns has a really beautiful user interface with lots of explanatory graphs to help you learn about investment allocations, which can help someone new to investing make sense of it. If you’ve been nervous about getting into the stock market before, this might just be the stepping stone you need. The amounts of money you’re investing are pocket change, so you’re not gambling your savings away on the next hot stock, but the investment approach is honest and straightforward.

Okay, so what’s the catch?

So, it costs $1 per month to use their service up until you have $5,000 in your account. After that, it’s 0.25% per year. That’s a bit of an ouch, but it’s not totally unreasonable. The funds they invest your money in don’t have huge expense ratios, so they really are keeping things honest. What you’re paying for is a nice interface and some hand-holding in setting up your portfolio, and that could be really useful for someone just getting started. Is it a good long-term investment strategy? No, because you can put your money places that don’t charge you 0.25%/year once you get comfortable with investing your own money (like Vanguard).

On the bright side, unlike Vanguard, Acorns lets you get started in investing WITHOUT having to have a big lump sum to put down. Most “big name” investment companies will require at least $1,000 if not $5,000 to get started, so if those numbers look a little too big for you, Acorns is where it’s at.

In Conclusion

Use Acorns to give you a gentle push into investing if you need it. Use it to watch your spare change rise and fall with the market, and get a feel for the kinds of decisions an investor has to make. Look at it as a fun way to help you learn something, not as a serious investment.

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