I had a bad experience with investing years ago. I lost a lot of money in just a very short time, so I swore to myself that I would never ever make any risky, mindless investment again.
Last year, when I heard about this investment app called Acorns , I immediately shrugged off the idea of doing anything with it. More so upon learning that this company invests your money in stocks.
I had ZERO idea about investing in the stock market, so I thought that making such a move was a losing proposition for me.
Acorns is still making a buzz today and reviews have been popping up everywhere online, which made me rethink it. I started reading more about this investment app, weighed its pros vs cons, read reviews of users, as well as learned more about the company itself.
I was particularly drawn to the idea of saving without thinking and investing your spare change. It sounded less risky so I thought why NOT?
I gave it a shot and a few months after, I was surprised that my account accumulated over $200 from my weekly purchases!
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Sure, $200 is not an amazing amount, but I barely noticed this money being pulled out from my account through Acorns’ great features. I thought that if I save this much consistently per few weeks through Acorns, I would have over $4000 in a year easily.
Update: After a year of using the app, I was able to bank way more than this through Acorns.
So today, let me share with you my honest opinion of Acorns, what made me change my mind, whether or not it’s really worth it, and whether I recommend this app. I will also share with you this mind-blowingly simple plan of turning $60 into $124,000.
Before we head over to the meat and potatoes of this post, let me tell you straight up. First, I am not an expert in investing and there might be things I may have left out in this review.
Second, while there are so many pros of using Acorns, there may also be disadvantages of investing through it, so please do your own due diligence before signing up. But if you decide to download it later (the app is free), you can download it through this link and receive $5 to get started with saving and investing.
So let’s get started.
First, what is Acorns?
In a nutshell, Acorns is a money app that invests your spare change whenever you shop.
If you spent $3.80 for a coffee using the credit/debit card you linked to Acorns, Acorns will see the transaction, transfers the spare change of $0.20 to your Acorns account. When your account hits $5, Acorns will withdraw the money and invest it.
You can also set up your Acorns account with a recurring payment of $5-$5000 per day, week, or month to help you grow your investment faster.
I find Acorns as a tool that helps you save money similar to the traditional way of saving in a piggybank and at the same time invests your money.
Important Basic Features
Round Up– As I mentioned earlier, Acorns will round up every purchase you make using your linked card to the nearest dollar. I think this is the easiest way to save money.
Multiplier- This is a new feature that allows you to multiply your spare change by 2,3, 10 to boost your savings.
Found Money– If you’ve followed me for long, you know I’m a huge fan of getting cashbacks/rebates. Acorns has joined the party with this, but instead of giving you cashback, they add your free money into your investment portfolio.
Acorns Later– This is a new feature that allows users to invest in a specially designed individual retirement account (IRA). To use this feature, you’ll pay an additional $1 per month until you invested $1 million with Acorns.
Potential– This tool allows you to see the projected value of your investment.
Acorns charges a flat monthly fee of $1 until you reach $1 million. When you reach that milestone , you’ll pay $100 per month.
There is no minimum deposit. So, if you are looking to invest, this is a more affordable option. If you are a student, the monthly fee of $1 is waived for you.
Acorns Pros and Cons
Now let’s delve into the Pros and Cons. If you read more reviews about Acorns, you’ll likely come across this:
- Free management for college students
- Cash back at select retailers (Found Money feature)
- Automatically invests spare change (Roundup)
- Educational content available
- No monthly fee for students
- No minimum investment requirement
- No transaction fees (which means you can add or withdraw money anytime and you won’t be charged any killer transaction fees.
What I Think
For me, Acorns’ roundup feature is where the app shines. You barely notice the money being pulled out from your account. It’s similar to Digit but with an investment feature. I kind of like this more than Digit because the latter only helps you save and doesn’t pay an interest for your money, while with Acorns your money could potentially grow.
I think that it’s also the best choice for you if you are new to investing and want to dip your toes into the investing waters.
- High fee on small account balances
Many reviews say that Acorn’s fee is considered high on small balances, which is true. If you only invest your spare change that totals to $10 per month, the $1 monthly fee will be 10% of your investment so it doesn’t make sense investing with Acorns at this rate.
- You can’t make significant savings out of the roundups
The roundup feature sounds really good and enticing. However, in reality, if you only make an average spare change of $0.25 per transaction, you’ll only save $2.5 per 10 transactions.
(Update: The new multiplier feature allows you to boost your roundups. For instance, using the x10 multiplier feature, you’ll be stashing away $2.5 for a spare change of $0.25.)
- Not internationally available
Unfortunately, it is only available for US residents and citizens.
What I Think
For me, the fee is not truly a disadvantage if you are looking to invest consistently with Acorns for the long term. As your money grows, the fee will become insignificant. For example, if your money has grown to hundreds, the fee of $1 will be less than 1 percent and your money could potentially generate more than the fee.
Why I Decided to Invest with Acorns?
Here are a few of the things that made me change my mind about Acorns.
You don’t need to be knowledgeable in investing to start
I am a newbie to investing and with that said, I thought that my lack of knowledge would put me at a disadvantage.
But upon reading more about the company, I learned that with Acorns you are not really buying individual stocks. They invest your money in a smart portfolio or ETF’s (Exchange Traded Funds, also referred to as Index Funds) so your money is not at risk with any one stock or company.
So, you don’t venture on your own and select a company to invest in, which is risky when you don’t know much about the market. All you need is just choose from five different smart portfolios on a scale of conservative to aggressive and Acorns will invest your money according to your preference.
Knowing this has cleared one of my apprehensions about investing.
Reliability of the Company
I believe this is a major concern for anyone looking to make an investment. Can you really trust Acorns?
I always fear investing in new companies but after some research, I learned that this company is backed by big name investors.
Here are some details about the company: As of May 2018, Acorns has raised nearly $97 million in venture capital and had more than 3.5 million users. Its sister retirement app Acorns Later, which launched in April 2018, earned 100,000 signups in its first month on the market.
Acorns is Securities Investor Protection Corporation (SIPC) insured for up to $500,000 meaning that if Acorns were to shut down you would be covered for a maximum of $500,000.
In addition, most of the stocks of Acorns are ETF’s by Vanguard which started in 1975 and has over $3 trillion in assets under management as of 2014.
I hope this also clears up your doubts about the company.
Power of Compounding
Acorns offers a great opportunity that’s hard to pass up: to buy the power of compounding with minimal upfront investment.
In reality, you can achieve this with other brokerage such as Betterment, Wealthfront and Personal Capital. But since Acorns has no minimum deposit requirement, it is easier to get started with investing through this company. And as advertised, you can start investing with your spare change.
Now, let me demonstrate the power of compounding using the app’s feature “potential.”
My account is currently set with a recurring monthly payment of $10, but I’d like to change it to at least $100 per month.
Here’s the projected value of an investment of $100 per month using Acorns.
Yes, it’s kind of disappointing to know that it will take 40 years to reach that amount. However, if you just save $100 per month, you’ll only save $1200 per year/ $48,000 in 40 years.
So, at this rate, I will potentially gain $144,278 using Acorns.
Now, let me give you another example of the power of compounding.
So, for a start, I decided to invest $100 a month with Acorns but I want to make a small weekly payment of $25 per wee, which still totals to $100/month, right?
Through this method, I am investing $25 per week which means that once that $25 is invested, that small investment will start working for you earlier than the other 3 installments of $25.
According to Acorns, this $25 per week investment could potentially grow to this amount in 40 years:
As I’ve mentioned this is just a projected value based on research or how these portfolios gained in the past.
And of course, you don’t have to wait for 40 years to get your money. You can make a withdrawal anytime.
Is Acorns for Everyone?
Of course not.
But it may be for you if:
- You struggle to save money to invest. Undeniably, Acorns offers a painless way to save money
- If you’re a student (it’s free for students)
- You’re a hands-off investor and want somebody else do the thinking to invest your money.
- If you are looking for an app that saves money for you and invests it
If you want to sign up for Acorns to start saving and investing, don’t forget to sign up through this link to receive a free $5 for you to get started.
As always, please do your own due diligence before signing up. Weigh the pros and cons