What up money moguls!
Got a new company to share with y’all today, and it’s giving my Digit a run for its money ;) It’s called Acorns, and it’s an app that rounds up your transactions to the nearest $1.00 and drops your spare change into investments. It’s all automatic, and it’s all awesome!
(And yes, if this sounds familiar it’s quite similar to Bank of
Horrible America’s Keep The Change program. Only, it *invests* your money instead of saving it, and you don’t have to be connected with B of A (whew). They also help you choose the right portfolio to dump the $$ into which is cool.)
I’ve been secretly using Acorns for a little over a month and a half now (I’m cheating on Digit, shh!), and so far I’ve banked $123.12 of investments:
[Update 1/24/17: Now up to $600.22!!]
Not an amazing amount of money, but hell – it’s mostly from spare change! (Technically only $80’ish is from spare change as I was playing around with their “invest more” feature and dropped in $40 to test things out… And the market then changes things for the better or worse too ;))
I tend to get long winded when I’m super excited about something new – especially money products! – so let me try and hit you with the TL;DR version of why I’m crushing on these guys right now:
- It’s all automatic!
- I barely notice the money being pulled out
- It’s a fun *extra* way to invest on top of the other avenues I’m already doing
- There’s no transaction fees! (Although there is a small monthly fee – see below in “cons”)
- I love checking my account every week to see how high it went
- Most of their portfolios are Vanguard index-based!!
It’s also the very first app to let you create an investment account straight off your phone too. Not that we’re *that* lazy that it’s necessary, haha, but still. Shows you how future-thinking they are at least :)
Here’s how Acorns works in a nut shell (no pun intended):
- You download the app (Update: You can now sign up through their site directly as well)
- You create an account
- You link up a funding account (like your checking)
- You answer some questions about yourself (which helps them recommend a pre-made portfolio)
- You sit back and do nothing :)
So, pretty similar to my beloved Digit, only it *invests* your money instead of *saving* it. Which of course has pros and cons on either side (it has a chance to grow which history shows it will, but you can’t easily just “take it out” like with savings as it’ll trigger tax stuff and what not).
You can also tweak the settings to round up to other numbers as well and not just a dollar. And if you’re feeling aggressive, you can always dump in more money in one-time chunks or just attach more financial accounts to your Acorns one too. I have both our “house” checking and our “house” credit card attached so it’ll round up from two areas and not just one like with checking only.
Oh, and in case you’re wondering, they don’t actually invest $0.38 here and $0.05 there – what they do is wait until you’ve hit $5.00 in rounded up amounts and THEN they invest your money. Which makes sense – this cuts down the amount of transactions being sent all over the place! And all this money comes directly out of your main “funding” account you’ve attached to your account (for me, it’s our “house” checking), and not the others if you’ve attached a handful of them – if that makes sense?
(For example, if they’re rounding up your credit card transactions they’re not gonna pull the $$ to invest off there – they’ll pull it from your linked checking account so you never have to worry about anything funky happening. You just have to make sure you have the $5.00 in your checking account ‘cuz unlike Digit, they won’t reimburse you if you overdraft!)
Of course, no Acorns review would be complete without covering the possible downsides of using the app.
The cons to using Acorns:
- If you don’t do a lot of transactions, or set up automatic roundups, you’re not going to invest much. That’s probably good over all (less transactions = less money going out! ;)) but in this scenario you’ll invest less too. Unless you increase the threshold or attach additional accounts to track transactions from.
- Their customer service isn’t the best. I had to tweet them to get a response faster (I lost patience after 3 days of sending them a question via email), but once we were interacting they were super fast and helpful – for what that’s worth…
- They charge a monthly fee which is how they get paid: $1.00/mo for accounts under $5,000, and 0.25%/year for accounts over $5,000. This is additional to any fees the investments charge (which, thankfully, isn’t that much, at least w/ the Vanguard ones) (UPDATE: Acorns has now waived their fees for all students and people under 24! Bad ass!)
needan Android or iPhone to use Acorns. (UPDATE: You can now sign up through their site directly or through their app on your smart phone)
- You also need to be in the U.S. (they’re not international yet)
- And of course, you can lose your money. Your account is insured through the Securities Investor Protection Corporation (SIPC) for up to $500,000, but there’s no promise your investments will go up. However, this is with *any investing* you do, not Acorns specifically. If you don’t believe in the stock market or ETFs/indexes, then I’d advise against this.
- UPDATE: Acorns doesn’t work with *all* financial institutions, particularly the smaller ones, but most of the larger banks will connect just fine. If yours doesn’t connect with them it might be worth trying again at another point as I’m sure they continually add new banks to partner with.
Luke from ConsumerismCommentary.com also did a good review of Acorns that I liked, though his recommendation in the end was not to use them (he didn’t like the fees, though they’ve since changed). I obviously don’t agree since I’m having a blast investing through them, but it’s a good read nonetheless :)
I think the main thing to keep in mind is whether you use Acorns on the side, like I am, or if you want them to be your main source of investing – which could change things. In theory you can just invest all your money directly with Vanguard or the other funds for no monthly/yearly commission (outside of the funds themselves), but the question is – will you do it? Most people won’t… It’s the same beef people have with Digit since they don’t pay interest on the savings.
[More screenshots form my personal account… You’ll notice my portfolio is “aggressive” (they recommended one notch lower for me, but I like more risk) and that I’ve invested more than what my account is currently worth ($128.50 vs $123.12). Not ideal so far, but I’m not worried… It’s $123.12 more than I had invested before! :)]
Other FAQs through their site:
- Is there a minimum investment amount required to open an account? Nope. Your first investment will be $5.00 whenever/if ever you hit it from all the rounding up…
- Can you withdraw money anytime? Yup. But again keep in mind the tax rules/etc since these are investments and not just savings.
- Can you change your investment allocations? Yup! They offer half a dozen choices to go with… but they’re indexes and not individual stocks like Apple or GE, etc. So if you like that sorta thing Acorns won’t be for you.
- Does Acorns rebalance your portfolio for you? Yes, usually every quarter.
- Are dividends re-invested for you? Yup!
- Do you have to pay taxes on the money you make? 100% yup :)
One-on-One with Jeff Cruttenden, co-founder of Acorns:
A lot of people found the interview I did with Digit’s co-founder helpful when writing up that review, so I thought I’d do the same here with Acorns founder, Jeff Cruttenden for my Acorns app review. It’s always more interesting hearing from a *person* on the background of their companies than it is reading off their site :) So hopefully you enjoy this one too!
First off, thanks for making Acorns! I’m all about new ways to be rewarded for being lazy, and even more so when we’re talking about money. How’d you come up with such a bad ass idea?
While I was in college, I was surprised at how many of my peers had an interest in investing but couldn’t overcome the barriers in their way like high minimum balance requirements and fees. From that point on, my father and I sought to simplify investing and create a more realistic approach for young people to get started.
As a recent Boglehead convert, I was THRILLED that 4 out of your 6 investment options are with Vanguard indexes. What made you guys go that route?
The portfolios were developed with guidance from Dr. Harry Markowitz – the Nobel Laureate commonly referred to as the “Father of Modern Portfolio Theory” and a team of economists, mathematicians, and engineers. Each of the six indexes was chosen to optimize the diversification of our portfolios across asset classes for where they fall along the efficient frontier where returns are optimized for a given level of risk. Four of the six are Vanguard indexes as they best represent the asset classes to accomplish optimal allocation.
In about a month and a half I’ve banked $123.12 in automatic investments because of y’all. It’s not a ton, but it’s a lot more than $0.00. How much have YOU been able to invest using your own app so far?
I have a dumb tax question – at the end of the year, how will all these purchases look in terms of transactions? Will I have to report/document 1,000+ purchase dates and ticket amounts for all these micro-investments going on? Or will it all be nice and simple somehow just like everything else with Acorns?
Acorns provides each investor a Form-1099 at the beginning of each new year for the past year of investing with Acorns. This can be found at statements.acorns.com. While you need to pay taxes on all realized capital gains, you can also deduct any realized capital losses. Acorns does not provide tax advice but recommend consulting with a tax preparer or CPA.
I’ve been obsessed with another product that recently hit the streets as well – Digit. And every time I mention them to other finance lovers I often get back, “kinda like Acorns?” Would you say they’re your closest competition? What do you all do, in your opinion, that’s so much better than them? (In full disclosure, I’m an adviser to Digit. But don’t worry, I won’t hold it against you ;))
Acorns is the first true micro investing company, allowing people to round up purchases and automatically invest the change. The Acorns app and financial engine were built to help people micro invest commission-free into a diversified portfolio of index funds. Thus, the main difference between Acorns and Digit is that Acorns invests the money you add into your account whether it be from your spare change, recurring investment, or lump sum. Digit is a great way to help you put away money into savings.
Any cool features coming down the pipeline?
We will be launching our web app in the next few weeks. We just started our beta and are looking forward to adding this to our current and potential customers as a way to invest with Acorns.
Lastly, if you could grab a beer with anyone in the world – dead or alive – who would you choose?
So to recap this Acorns review:
- Acorns is a good way to invest if you’re having trouble doing so
- You just download the app and link up your account
- Let them advise a portfolio for you to invest in (or just pick it yourself – like I did)
- Then watch the account grow over time with micro-investments!
And there you have it :) Another rundown of another company I’m now obsessed with again… Between using Digit and now Acorns, I’ve put away over $500 this year without lifting a finger: $390.74 from Digit and $123.12 from Acorns. That’s pretty cool!
And if it seems like I’m an easy “win,” I assure you it’s not the case. I’ve poked around over 50+ financial companies over the past few months (we get pitched like crazy as bloggers!) and these are literally the only two I’ve started using myself. That’s a small %, and especially so considering it takes me a LOT to be convinced to un-simplify my finances.
Anyways, thought you guys would love to hear about this one so hopefully it helps :)
Will Acorns be for everyone? Of course not. But if you’re having trouble setting aside money to invest, they’re a great app to consider. As always, please do your own due diligence before ever signing up to these things. What works for me might not always work for you!
PS: I’m not getting compensated whatsoever for this review, which proves even more how much I’m a fan! Not that I would turn down any, haha… I gots no problem pimping out companies I use myself. (UPDATE: I now get compensated for signups :))
Other “Automatic” Reviews:
- Automatically save more money: Digit Review
- Automatically pay off your debt: Qoins Review
- Automatically track your money, investments and net worth: Personal Capital review
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!