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- I haven’t always been great at taking care of my spare change, but once I started putting it in a jar to save for a fun future purchase, something clicked — I wanted to keep up the habit.
- Acorns is an app that makes saving your “spare change” easy — it rounds up your purchases to the nearest dollar and invests the money in ETFs.
- In just a few months, I’ve saved $400 towards a used car purchase and I’ve hardly noticed the money leaving my account.
- Read more personal finance coverage.
As someone who prides themselves on living by a budget, I wasn’t always the best at taking care of my spare change. I often viewed spare change as a nuisance, and even threw pennies away because I didn’t see their value.
Then I received a tip to start saving my spare change in a jar for an exciting future purchase, and this changed everything — I suddenly had a good reason to save. After doing this for a while, I decided to take it to the next level and start investing my spare change with Acorns, a fintech app, through roundups from my regular spending through my checking account.
I realized if I could save small amounts through roundups and earn more by investing the money, it would be a win-win.
If you’ve ever heard the term “squirreling away savings” before, you’ll know that the name Acorns matches what the platform does perfectly. Squirrels store nuts and acorns during seasons of plenty. This gives them a nice stash or reserves to rely on whenever they need it or if resources get scarce.
Acorns is a micro-investing company that offers two options:
- Invest your spare change through roundups and weekly deposits
- Save strictly for retirement through an Individual Retirement Account (IRA), which you can also start by rolling over your 401(k)
I chose to start with the spare change roundup option. This means Acorns connects to my checking account and rounds up my purchases to the nearest dollar to invest the difference. For example, if I spend $53.04 at Walmart, Acorns will round up $0.96 from my account and invest it for me.
Here’s a snapshot of some of my recent roundups.
After a few months of investing with roundups and weekly $5 deposits, my balance is about $400. It’s not all that much yet, but it shows that you can save money relatively quickly and automatically with not much effort. It’s common knowledge that many Americans don’t have $400 on hand to cover an emergency, so this is an easy way to save that much without even noticing.
With Acorns, you invest in ETFs (exchange-traded funds). This is just a fancy way of saying a mix of stocks and bonds. ETFs tend to replicate an asset class or index like the S&P 500 or the Dow Jones.
Acorns diversifies your ETFs among large companies, other organizations, and real estate so you don’t really have to think about where to invest.
I just log into the dashboard to see my past, present, and potential earnings details.
My portfolio is moderately aggressive because I want to grow my money fast. I like how I can withdraw money whenever I want (there’s a $5 balance minimum) with no fee. With an Acorns IRA account, you pay a penalty to withdraw your funds early.
My goal for Acorns is to save as much extra money as I can on the side without making too many sacrifices with my spending. That way, I can afford a larger purchase in the future, like when my husband and I decide to buy another used car.
While Acorns roundups are so small you might not notice them, you can boost your balance by doing four key things.
1. Add a larger lump sum payment to your account balance with an automatic transfer from your bank
Want to add $500 to your Acorns account to get it started? While this isn’t required, it can help your account balance grow a little faster.
2. Start contributing a weekly lump sum
I do this by automatically depositing $5 per month.
3. Multiply your roundups
If you’re already rounding up transactions to the nearest dollar, you can multiply this amount by 2, 3 or even 10x and invest it.
4. Earn Found Money
This feature helps you earn rewards for regular purchases that can be deposited directly to your Acorns account. More on this below.
It’s no secret that some sites like Rakuten and Swagbucks will pay you cash back to shop or spend money online. Acorns does this too, but instead of giving you 10% back for spending money on Amazon, for example, the app takes that amount and invests it into your account instead.
By now you may be wondering how much it costs to use Acorns and all its features. Each month, I pay a $1 fee — again, I hardly notice this money coming out of my account. To use the IRA investing account, you’d pay $2 per month to start out. Once you reach a balance of $5,000, the fee changes to 0.25% of your assets.
Acorns doesn’t cost much, but at the same time it’s not something you can expect to solely fund your retirement. I’m in my late 20s now, and when I looked at my projections, if I keep investing at my current rate I’d only barely have $100,000 by age 68.
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If I update my recurring monthly deposit to $100 and keep investing roundups to the nearest dollar, I’d have around $250,000 by age 68. Still not enough to retire comfortably.
Not to mention, my fees would be 0.25%.
Pros and cons of investing with Acorns
- Start investing with $0. Many robo-advisers require at least $500 to open an account
- Automatic roundups and lump-sum or recurring deposit options to grow your balance faster
- Invest in a range of ETFs depending on your desired level of risk
- No withdrawals fees if you’re investing your spare change
- While the monthly fee is low, it could still be a significant amount with a smaller balance For instance, if you have $500 in your account, a $1 fee would equal 0.2%
- While the whole premise of the app surrounds investing small amounts, you run the risk of not feeling motivated to contribute more over time
- Management fees increase once your balance reaches $5,000
Acorns would be a great option for someone who’s just beginning to invest or is very risk-averse. Or, maybe you’re like me and just want to grow your balance for a set timeframe then withdraw the money to use for a moderate or larger expense.
If the idea of losing a ton of money in the stock market makes you nervous, use Acorns to start making small contributions. You can begin with roundups and even increase weekly or monthly deposits at your own pace.
If you lose some money in the event the market falls, you may not suffer too great a loss. I also enjoy the fact that you don’t have to be an expert on stocks or bonds to use Acorns. You don’t get to pick your specific stocks, but this could be a relief if you’d rather an algorithm assess these choices for you and make adjustments.
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