Acorns makes it easy to invest your spare change, but the monthly fee might not make sense for everyone

Clint ProctorFeb 22, 2020, 19:57 IST

Acorns is a micro-investing app that makes it easy to invest your spare change.
With Acorns, you can round up your transactions to the nearest dollar and can start investing with as little as $5.
Acorns also offers retirement investing with its Acorns Later product, and its Acorns Spend product gives users a checking account and debit card with no ATM fees.
Open an Acorns account today and start investing for your future »

When I was a kid, my parents always kept a jar in their closet for their spare change. They'd fill up the jar throughout the year and then deposit the money in the bank right before our summer vacation.

They loved the "spare change jar" approach to saving because it felt so painless. It was only a few cents here and there. Yet, over time, it added up in surprising ways.

But there's one big reason why I don't have my own "spare change jar." I don't use cash. And there's probably a good chance that you don't either. But what if there was a way to save the "spare change" from your card transactions? And what if you could not only save the money, but invest it in the stock market?

It turns out that you can do exactly that and more with Acorns, a micro-investing app and website.

What is Acorns Invest?

Acorns Invest is the core service that Acorns offers to its users; it costs $1 per month. Here's what you get with an Acorns Invest account.

Round-Ups let you invest spare change

After you've created your Acorns account, you'll have the opportunity to link your bank account, debit card, or credit card. Once your card or account has been linked, Acorns will monitor all the purchases that you make and round up each transaction to the nearest dollar.

For example, if you bought a cup of coffee for $2.25, Acorns would set aside $0.75. Once you've reached a $5 threshold in your Acorns account, it will be automatically invested in your Invest account portfolio. Acorns says that the typical person invests over $30 per month with Round-Ups alone.

You can set Round-Ups to work with every transaction or you can manually select the transactions that you'd like to round up. Also, you can tell Acorns how much you'd like to invest when your transactions equal exactly one dollar.

Finally, you can supercharge your Round-Ups by adding a multiplier of 2x, 5x, or 10x. That means a Round-Up of $0.25 would actually add $0.50 to your Invest account with a 2x multiplier, for example.

Investing with 'found money'

Acorns has partnered with over 300 companies that will invest a percentage of your sale amounts into your Acorns Invest account. Several popular brands are Found Money partners, including Airbnb, Nike, Walmart, Barnes & Noble, and more. This means that, instead of getting cash back from a purchase, the company will add a small amount to your Acorns Invest account.

Each brand is free to set its own investment amount. When I checked the Found Money page on my account, these are the offers I found:

Tidal: Will invest 5% of your purchase
Walgreens: Will invest 2% of your purchase
Chevron: Will invest $0.25 when you spend at least $20
Walmart: Will invest 1% of your purchase

You can search for Found Money deals on the Found Money section of the Acorns app and website or by using the Google Chrome extension. Found Money rewards are credited to your account 60 to 120 after your purchase.

Set up recurring investments

If you'd like to invest more than just your Round-Ups and Found Money rewards, you can do that with Acorns, too.

When you set up your Acorns account, you can set up a weekly recurring investment. You can also transfer one-time amounts to Acorns from your linked bank account at any time.

What is Acorns Later?

Acorns Later is a solution for investors who are looking to use Acorns to save for retirement. With Acorns Later, you can open an IRA in just a few taps. Acorns will help you pick the right IRA for your situation and, as with Acorns Invest, you can get started investing with as little as $5.

For most users, Acorns Later will only cost a dollar more than Acorns Invest. You'll pay $2 per month for Acorns Later until your amount invested with Acorns exceeds $1 million.

What is Acorns Spend?

Acorns Spend comes with all of the benefits of Acorns Invest and Acorns Later, plus you get an Acorns debit card and checking account. It's also the most expensive Acorns product, at $3 per month.

One of the main benefits of Acorns Spend is the ability to get Real-Time Round-Ups (instead of having to wait for the transaction to settle). The Acorns Spend checking accounts also come with no minimum balance or overdraft fees. You'll never have to pay ATM withdrawal fees either.

However, it should be pointed out your Acorns Spend account is a checking account, not a high-yield savings account. You won't earn any interest on your uninvested funds.

How to sign up with Acorns

It's easy to start investing with Acorns. It took me about five minutes to get up and running. First, you'll need to create your account and password.

Next, you'll need to link your bank to your Acorns account. For most banks, you'll be able to connect your account by simply providing your bank login credentials.

Next, Acorns will ask you for some more information about your income, risk appetite, and financial goals. You'll also have the opportunity to choose how much of the cash in your Acorns account you'd like to invest.

Finally, Acorns will tell you how it plans to invest your money, based on the information you provided.

Above, you can see the asset allocation that Acorns suggested for me. More specifically, Acorns said that my funds would be invested in the low-cost ETFs seen below.

These funds represent a mix of companies, markets, real estate, and bonds. Acorns uses these same six funds for every investor. However, your specific risk tolerance will affect the percentage of your funds that are invested in each ETF.

Is Acorns worth the cost?

On the surface, Acorns' fees seem inexpensive. After all, even its priciest tier only costs $3 per month. But, like other micro-investing apps, it's important to think about fees from the perspective of a percentage of your invested funds.

For example, let's say you're an "average" user and invest about $30 per month with Round-Ups. If you were an Acorns Spend user paying $3 per month, that would be 10% of your invested amount.

Even if you only paid the $1 fee, that would still be over 3% of your invested funds. That seems pretty outrageous when you consider the fact that some of the top robo-advisers charge as little as 0.25% of assets under management.

However, it should be pointed out that Acorns' flat-fee structure benefits users more as their portfolios grow. For example, with a $10,000 portfolio, Acorns pricing becomes a steal. While you'd pay $25 per year with a 0.25% pricing structure, the basic Acorns Invest tier only costs $12 per year.

Finally, it should be pointed out that if Acorns' "invest your spare change" model helps you invest just $12 to $36 more per year than you would with a different provider, the benefits of the technology outweigh the cost.

Want to try investing your spare change? Open an Acorns account today to get started »

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

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