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Investing is essential for growing your wealth, but many people hesitate for two reasons; they fear investing is too complex to figure out or think they don’t have enough money to invest. If those worries sound familiar, Acorns might be right for you!
Table of Contents
What is Acorns?
Mighty oaks grow from tiny acorns. That is the idea behind Acorns. The app rounds up your purchases to the nearest dollar and invests that spare change.
Acorns is the top micro-investing app in the United States. Its easy-to-use, mobile-centered interface makes it easy for anyone to save and invest their spare change. Acorns enables customers to automatically invest in low-cost, diversified portfolios of exchange-traded funds offered by many of the world’s top asset managers (including Vanguard and BlackRock). Customers grow their investment in one of five portfolios built with help from world-renowned Nobel Laureate economist Dr. Harry Markowitz. Acorns smart portfolio algorithms automatically work in the background while you live life, helping you build wealth passively, pennies at a time. From Acorns mighty oaks do grow!
How Acorns Works
Link a credit card and checking account to the app. Each transaction is rounded up. That amount is drawn from your checking account and held in your Round-Up balance. Once the balance reaches $5, the money is withdrawn from your checking account and automatically invested.
Users have several options:
- Choose specific transactions to be Rounded-Up or set the feature to automatic, in which case all eligible purchases will be Rounded-Up.
- Turbocharge Round-Ups by two, three, or ten. For example, if you made a purchase for $3.54, rather than adding $0.46 to your Round-Up balance, you could add $0.92, $1.38, or $4.60.
- Deposit cash rewards from a credit card to your Round-Up balance.
- Participate in Acorns Earn, a cash-back program that earns money for your Round-Up account when you use a linked payment method to shop with an Acorns partner.
- Set up recurring deposits to your Round-up Balance daily, weekly, or monthly.
The Acorns Investments
The portfolios are made up of diversified, low-fee ETFs. ETFs provide a lot of diversity as they invest your money across a wide variety of companies and asset classes. A diverse portfolio is an essential part of successful long-term investing as it spreads your risk, the old not putting all of your eggs in one basket scenario!
- Conservative: 100% bonds
- Moderately Conservative: 40% stocks, 60% bonds
- Moderate: 60% stocks, 40% bonds
- Moderately Aggressive: 80% stocks, 20% bonds
- Aggressive: 100% stocks
Acorns has five Core Portfolios and has recently added four “Sustainable” Portfolios. The Acorns Sustainable Portfolios are made of funds that have been selected based on their environmental, social, and governance business practices, or their ESG rating.
Based on your answers when creating your account, you’ll be recommended one of the above portfolios, but you are free to choose whichever you want.
Creating Your Acorns Account
Acorns is available via app or desktop. Setting up your account is simple:
- Select a Round-Up Account: Here is where you’ll choose which transactions you want to be rounded up.
- Link your checking account. This is where Acorns will withdraw from for your Round-Up account. Acorns use bank-level encryption to protect your data.
- Create your investment account. You’ll provide your identification information and asked if you are or have been affiliated with a broker-dealer, have you been notified by the IRS that you’re subject to backup withholding, are you a 10% shareholder in a publicly-traded company?
- Answer some questions regarding employment, income, and why you’re investing. These questions are designed to help Acorns recommend an investment portfolio for you.
- Provide your Social Security number to confirm identification, prevent fraud, and for tax reporting. Again, the data is encrypted.
- Tick each signup box and hit the “Get Started” button.
While investing is Acorns’ bread and butter, they also offer Acorns Spend. This checking account offers a debit card and ATM access, just as a traditional checking account does.
Purchases made with this account can be rounded up and invested as described above. Acorns does not have a minimum balance and doesn’t charge overdraft fees.
Currently, Acorns is offering a $75 bonus for those who open an Acorns Spend account. Create the account, use it to receive direct deposits from your employer, receive two direct deposits of at least $250, and you’ll receive the $75 bonus within 45 days!
Acorns Early allows you to invest in an custodial account that your child cannot access until they reach adulthood. You can set up recurring investments as low as $5 per day, week, or month – whatever you choose. You can change it at any time.
You can add more than one child to benefit from your acorns account(s) and there are potential tax benefits, depending on your state. You can open an Acorns Early account for your own children, a friend’s children, nieces, nephews, etc. It’s a great way to set someone you care about up for future success.
You can create a gift link to share with friends and family, so they can contribute directly to the child’s account for birthdays, holidays, or whenever they’re feeling generous.
Unlike a 529 account, funds in an Acorns Early account can be used towards anything that benefits the child and can be easily transferred to them once they grow up.
One of the best benefits of using Acorns is being able to manage your investments, checking account, and children’s accounts all in one place.
How Much Does Acorns Cost?
Acorns doesn’t require an account minimum, a commission fee, or penalties to withdraw funds. For accounts with less than $5,000, there is a $1 monthly flat fee. For $3 per month, Acorns offers an Acorns Personal Account which includes your investing account, a checking, and a retirement account. For $5 per month, you can have an Acorns Family account, a custodial account for parents who want to invest for children under 18 who can’t have an investing account.
Is Acorns Right for You?
Acorns is great for those who are nervous to start investing, those who don’t have a lot of money to invest, or those who struggle to “pay themselves first” and consistently put money into an investment, a requirement for growing your wealth.
That said, investing spare change isn’t enough to become wealthy. To make Acorns or any investment work for you consistent and significant contributions are best. A good rule of thumb is 15% of your gross income per year, but it’s better to save any amount than nothing at all. For as little as $1/month, you can put away some cash for a rainy day and potentially see some great returns.
Investing involves risk including loss of principal. App screenshots are simulated and subject to change. Acorns Advisers, LLC is an SEC Registered Investment Advisor. Brokerage services provided by Acorns Securieies, LLC, member FINRA/SIPC. Images subject to copyright by Acorns. This article is not intended to provide investment advice. RideshareGuru.com is an affiliate of Acorns and may receive commission for referrals to the Acorns App. Consult with a licensed investment professional before investing.
Candice Elliott has been a freelance writer specializing in personal finance since 2013. She learned to manage her money the hard way after moving to New York City and living paycheck to paycheck for years. She wants to help others avoid the personal finance mistakes she made while providing easy and actionable advice in an entertaining way. Candice now lives in New Orleans where she admits she spends more than she should on restaurants because the food is as good as you’ve heard.