Disclaimer: The links in this blog are my referral links, meaning I’ll get a bonus $5 bonus if you sign up for Acorns using my link. You’ll get $5 too by signing up through my link. I do not review or share products or services unless I personally use them, have had significant interaction with the company itself or I have tons of friends and colleagues who have used them with success.
This is a part of our review series. For a full list of recommended products and services, check out the Resources page.
In today’s podcast episode I’m finally providing you guys with a heavily requested review of Acorns, a smartphone app that allows people to invest their spare change into the stock market.
But before I get into the Acorns review, I first want to discuss a problem that’s plaguing the millennial generation:
We’re not investing our money.
According to several reports and studies, we’re really good at saving. Millennials sock away money like a squirrel socks away nuts for the winter. The problem is that over 40% of our assets are in cash. The reason this is a problem is because having your money sitting in a bank account earning a measly interest rate won’t help you beat out inflation. In fact, the money in your account loses value over time as the price of good and services goes up.
Why Millennials Are Afraid to Invest
You can’t totally blame millennials for being afraid to invest. We came of age as the global economy was crumbling before our eyes. Not a single person walked out of The Great Recession unaffected and we pretty much know who to blame. As such, can you really fault us for being distrusting of financial institutions?
Secondly, this a generation that is in many ways still reeling from underemployment, high cost of living and student loan debt. An excuse (I’ll get to why this is just an excuse in a second) I hear often is that people simply don’t have extra money to invest. More specifically, there seems to be a misconception that you need a lot of money to get started investing.
Get over it.
This is the part where I have to give my peers a little tough love. Being afraid of the market or feeling like you don’t have extra money are not valid excuses for not getting your financial life together.
First, if you educate yourself and use common sense, investing isn’t that complicated. It’s made to seem complicated by people who want your money, but the reality is it can be learned just like anything else. When done properly you can ride out the dips, especially because we’ve still got time on our side.
Second, there are now multiple ways to invest in the market that don’t require you to have large lump sums of extra cash. From Betterment for IRAs to dollar cost averaging to now Acorns. In other words, there goes your “I don’t have the money to do it” excuse.
Now that we’ve got that out of the way, I can get to this Acorns review. I’ve been using Acorns for almost a year and overall I’m quite pleased. Imagine my pleasant surprise when I logged into my account the other day and saw that I had over $500 of spare change being invested. It was pretty dope.
Below you’ll find my complete review of Acorns including pros, cons and helpful links.
What is Acorns?
Acorns is a smartphone app and service that links to your checking account, rounds up your spare change and invests it into one of the funds they have available. All you have to do is visit Acorns.com, sign up for an account, link your checking account and go.
It’s algorithm takes a look at your checking account and every time you purchase something Acorns will round up to the nearest dollar and save the difference. Once you reach $5 in spare change the money is then invested into either a fund they recommend for you based on the profile you filled out or one of your choosing.
Pros of Acorns
- It’s easy. You can literally be set up in 5 minutes flat.
- It’s automatic. I simply set it and forget it.
- You can also do fixed automatic deposits. You can tell acorns to automatically invest a fixed amount into the account each month. Nice way to add an extra boost.
- Helps you choose a profile based on your needs. When you first sign up for Acorns you fill out a profile where you assess your risk tolerance. Based on that, Acorns suggests a fund for you.
- Decent funds to choose from. This is another great way to invest into Vanguard funds which are known for being low cost with decent returns.
Cons of Acorns
- Their fee structure has caused some controversy. If you have less than $5,000 in the account you are charged $1 per month. If your spare change adds up to $10 and $1 is taken out, you’ve basically lost 10% to fees, which is high. However, in my opinion, this is better than what most people are doing, which is saving and investing nothing. After you hit $5,000 fees are 0.25% per year.
- Credit card users need to be patient. I use a credit card to pay for everything so I can cash in on points and simplify my finances. I then pay the credit card in full each month. Because of this, I don’t have very many “round-ups” for Acorns to save up. It’s taken me a while to get to those $500.
- Some people are afraid Acorns will cause them to overspend in an effort to round-up more change. I saw this online and proceeded to roll my eyes. You can’t blame Acorns for your spending habits.
Update May 18, 2016 – Acorns Rewards Program
Acorns recently launched a beta version of their rewards program, Found Money. The idea is that if you purchase something with one of their partners, those partners will give cash back that gets invested into your account. You just have to make sure you are purchasing with the account linked to your Acorns app.
I was happy to see that they’ve partnered up with Dollar Shave Club as I actually have a subscription with them. According to the Acorns app, Dollar Shave Club will invest 10% of my membership into my account. It’s good to know I’ll get a little extra cash in my Acorns account for buying something I actually need and use.
Other partners include:
JackThreads – Get $15 invested into your account with your first purchase.
Hotel Tonight – Spend $100 or more and they’ll invest $10 per transaction.
1-800 Flowers -Spend $20 or more and they’ll invest $15 per transaction.
Jet – Get 5% of your purchases invested into your Acorns account. This is kind of like an Amazon so it may be worth checking out for that 5% cash back.
Overall, I think Acorns is a great asset to add to your financial toolkit. It’s easy to use and it’s automatic, making it super millennial-friendly. Additionally, despite the odd fee structure, it’s helping people get started investing which is better than what most people have been doing on their own.
Links and Resources
Click here to get your own Acorns account (Referral Link where we each get $5).
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