When it comes to investing for your future, you likely know how important it is. However, actually finding the money to do so can be challenging. Between student loan payments, car loans, and credit card debt, setting aside money for investing can sound impossible.
That’s where micro-investing with an app like Acorns can help. Micro-investing — where you invest very small amounts — allows you to start investing with your spare change. But is it always a good idea? In this Acorns review, find out how micro-investing works, who benefits from it and how to use the Acorns app.
Who should consider Acorns?
With Acorns, you can start investing with little more than the change in your pocket. When you sign up for an account, you sync your bank account and credit cards with the app. The app scans your purchases and rounds up your purchases to the nearest dollar, depositing the difference into your Acorns account. Once you have at least $5 saved, it automatically invests in exchange-traded funds (ETFs) for you.
Because of how the app works, Acorns makes the most sense for new investors who aren’t sure where to get started. Acorns takes the guesswork out of investing and even has expert-picked portfolios you can choose from based on your risk tolerance.
Acorns is also a great option for those who simply can’t find any extra money to save. Acorns helps identify extra money you wouldn’t really miss because the amounts are so nominal.
Acorns fees and features
|Amount minimum to open account|
|Account fees (annual, transfer, inactivity)|
Acorns Core ($1/month) is free for college students.
|Tax loss harvesting|
|Offers fractional shares|
|Ease of use|
|Mobile app||iOS, Android|
Strengths of Acorns
Acorns can be a useful tool for new investors or for those struggling to find extra money to invest. It has several benefits that can help a new investor, such as:
- Ease of use: You can use Acorns from any device or smartphone, allowing you to manage your account anywhere.
- Low barrier to entry: While many investment companies require you to have hundreds (or even thousands) saved before you can invest, Acorns lets you get started with just some extra change.
- Found Money program: Acorns partners with some major retailers, such as Sephora, Macy’s and Expedia to offer cash back on purchases. You can get up to 10% cash back to invest when you make a purchase.
- Automation: With Acorns, you can set it and forget it, allowing your money to grow with minimal effort on your end.
Drawbacks of Acorns
While Acorns can be useful, there are some drawbacks to consider:
- Small investments: Getting started with your spare change is better than nothing, but you need to invest more than that to earn larger returns and for your retirement.
- Limited investment options: Acorns currently only offers individual investment accounts, Roth IRAs, Traditional IRAs and SEP IRAs. If you’re looking for other types of investment accounts, you’ll need to look elsewhere.
- Not much control: Acorns has pre-picked investment categories that are based on your risk tolerance. You won’t be able to pick and choose Stocks or ETFs to invest in; you’ll have to stick with one risk-based portfolio.
Is Acorns safe?
When dealing with apps like Acorns, privacy and information security is important for your peace of mind. It’s important to know that Acorns is SIPC protected, meaning every Acorns account is protected up to $500,000. There are account safeguards in place to keep your information secure, such as multi-factor authentication, ID verification and automatic logouts.
Acorns is a great option for beginning investors or those with minimal funds to open a traditional brokerage account. However, as your investments grow and you get in the habit of investing regularly, it may be worth exploring other traditional investments. For example, you may be able to earn higher returns by opening a Roth IRA with Betterment or by investing in your company-offered 401(k) instead..
If you’re ready to step up your investment strategy, here are five ways to take your investment skills to the next level.