- Review of: Acorns
- Reviewed by:
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Summary: Use the Acorns app to start investing with your spare change. It makes investing easy by hiding the complex details. The negatives: Acorns offers no retirement accounts and really isn’t enough savings for retirement planning.
For many of us, investing can seem overly complicated and somewhat intimidating if you don’t know the ins and outs. But Acorns intends to simplify and demystify this process through their revolutionary mobile app. The father-son team, who are based in California, created Acorns with the intention of removing any mental roadblocks or anxiety about becoming a regular investor.
With help from the father of Modern Portfolio Theory, Dr. Harry Markowitz, Acorns recommends optimized portfolios and keeps them on track with automatic rebalancing and dividend reinvestment.
What Is Acorns?
Proclaimed the first mobile investment application that lets you to open an account via your smartphone, Acorns is an up-and-coming platform that allows you to invest your spare change, with the goal of either building wealth or reaching short-term savings goals.
Using your mobile phone, you simply connect your bank accounts and invest the change from purchases you make every day. Obviously, the Acorns app is targeted to a much younger, more tech-savvy generation (Millennials), as the entire investment experience is created and managed from a smartphone. Acorns recently created a web-based version as well for desktop and portable users.
Small amounts of money — usually less than a dollar — are added up over time and invested into your account with Acorns, so you’re not dealing with large amounts of money or wealthy investors. Essentially, this app is a great starting point for anyone who hasn’t invested yet or needs a bit of guidance in the beginning.
Acorns Features
| Minimum Deposit | $0; $5 to start investing |
|---|---|
| Account Fees | $1/month for accounts under $5,000; 0.25%/year for accounts over $5,000; Free for individuals under 24 years of age and attending college |
| Mobile App | Yes — Apple iOS and Google Android |
| Web Site Access | Yes |
| Promotions | None |
- Available Accounts — Individual only. Retirement accounts are not available.
- Round-Ups — For each credit card transaction the Round-Up to the nearest dollar is invested into Acorns.
- Scheduled Deposits — Set recurring daily, weekly or monthly investments.
- Found Money (New) — When you shop with Acorn’s Found Money partner brands (such as JackThreads, Jet, 1-800 Flowers, Dollar Shave Club, Hotel Tonight and with more planned) , they invest in your Acorns account. This feature is currently in beta.
How to Create an Acorns Account
Signing up for an Acorns investment account is a relatively easy process and starts with signup on the web or downloading the app for free from iTunes, Amazon or Google Play stores. The app is available for iPhone or Android mobile devices.
The three-step signup process starts with entering a PIN access code, which will be used when you log into the app in the future. Creating an Acorns account is currently available only to U.S. citizens.
1. Choose a Round-Up Account
Your Round-Up account is the one that will be monitored for you; choose which transactions you want to round up and invest the change. Choose from the most popular banks, like Chase, BoA, Citibank, Wells Fargo, U.S. Bank, USAA, etc. If your bank isn’t listed, just click the “Next” button and type in your bank’s name in the search bar.
Then you’ll be prompted to log in to your bank using your online sign-in credentials. Next, you click the account you’d like to use in your round-ups. You can connect more than one if you’d prefer.
2. Connect Your Checking Account
Your checking account is different from your Round-Up account (this was confusing to me at first too) and is the account from which funds are transferred into your Acorns account. Connect an existing checking account from the list and sign in using your online credentials, or input your routing and account numbers manually from a different bank.
It took several minutes for my Chase Bank account to sync using my online ID and password. And don’t worry about connecting your banking information, as Acorns encrypts and protects all of the data with bank-level security.
3. Create an Investment Account
You’ll be asked to type in your first and last names, phone number and birth date and choose a security question/answer. Then it’s time to fill in your address and check if you’re a U.S. citizen or not.
Next, you’ll be prompted to answer three questions:
- Are you or have you been affiliated with a broker-dealer?
- Has the IRS notified you of being subject to backup withholding?
- Are you a 10% shareholder of a publicly traded company?
If none of these apply to you, just leave them unchecked. These are standard questions required by the SEC when opening any brokerage account.
The next screen will prompt you to fill in your employment information, net worth, yearly income and your reasons for investing. The answers to these questions will help them create customized advice and a recommended portfolio created by their team of experts, including a Nobel Prize–winning economist.
You can choose from five different reasons for investing:
- Long-term investment
- Short-term investment
- Major purchase
- Children
- General
Finally, your Social Security number will need to be filled in, which, according to the app, is used for ID verification, tax reporting and preventing fraud.
Once all the signup boxes are checked green, click the “Get Started!” button.
Your Recommended Portfolio
After the signup process is complete and you’ve created your investment account with Acorns, the app will process your portfolio. Simply view your portfolio to see a list of advice, tips and ideas.
The Moderately Conservative Portfolio was recommended for me based on my variable cash flow (as a self-employed taxpayer), a median net worth, my long-term investment reason, my age, and above-average income. However, I chose to go with the Moderate Portfolio for the purpose of this review.
To see a change in projected value over time, you simply drag the graph (either right or left and up or down) to change the amount invested each month. You don’t have to stick with the recommended portfolio. Just click on the different types of portfolios to find one that’s a better fit. There are five types to choose from:
- Conservative
- Moderately Conservative
- Moderate
- Moderately Aggressive
- Aggressive
Next, you can explore the ETFs and select an asset class you want to invest in. When you’re ready, simply click “Confirm Portfolio.”
How Round-Ups Work
Once your account is approved, they will withdraw the initial deposit and your account will be ready for investing. The Round-Up transfers come from monitoring your linked account and rounding up the purchases to the nearest dollar.
For example, I spent $22.43 at the gas station this week, and $0.57 was added to my Round-Up balance. Once the total reaches $5, the money is withdrawn from my bank account and added to my Acorns investment.
You can choose which transactions you want to include in your Round-Up amount or set it to automatic and it will calculate all of your transactions that are eligible.
Additionally, you can deposit cash reward bonuses from your bank or other rewards programs you participate in. Or choose to invest lump sum amounts in addition to your Round-Up deposits. If you prefer, you can set up recurring deposits on a daily, weekly or monthly schedule.
CFO Mark Dru explains:
“You can also invest up to $20,000 or $30,000 in a lump sum investment, so we’re not only attracting investors interested in doing the Round-Up, but more sophisticated investors as well.”
Acorns is similar to Bank of America’s Keep the Change program, which rounds up purchases made with your debit card to the nearest dollar and then moves the difference into a savings account. With Acorns, however, the money goes into an investment account with the intention of long-term savings and growth potential, rather than a simple savings account.
Investing and Pricing Features
Logging into the Acorns app allows you to view your portfolio, check the performance of your index funds, see what the market is doing, and much more.
Jeff Cruttenden, the co-founder and COO of Acorns says,
“We focus less on beating the market and more on index portfolios where we can capture the market and keep fees low.”
Within your preset investment portfolio, the Acorns app gives six options for basic index funds offered through BlackRock and Vanguard.
- Large Company Stocks — Vanguard S&P 500 ETF (VOO)
- Small Company Stocks — Vanguard Small-Cap ETF (VB)
- Emerging Markets — Vanguard FTSE Emerging Markets ETF (VWO)
- Real Estate — Vanguard REIT ETF (VNQ)
- Corporate Bonds — iShares iBoxx$ Investment Grade Corporate Bond ETF (LQD)
- Government Bonds — iShares 1-3 Year Treasury Bond ETF (SHY)
There are no deposit or account minimums to maintain, no commission fees, and no penalties when withdrawing funds. Acorns’ fees have recently been lowered. It’s $1 per month for your first $5,000, or 0.25% annually for accounts greater than $5,000. This puts their service more in line with companies like Betterment than their previous higher fees.
According to Vanguard the average mutual fund management fee is 1.02%, so Acorns fees are relatively low by comparison.
However, since you’re investing such small amounts, which do add up of course, the monthly $1 fee adds up to taking a large piece of your investment pie. And this fee gets even larger as your balance increases over $5,000.
It is important to note returns are not guaranteed and it is possible to lose principal. Acorns invests in the stock and bond markets and is not FDIC insured, though investments are SIPC insured. At the time of this article update, they have $87 million of assets under management.
New Student Feature
Acorns is targeting the younger generation with a great deal. Since July 8, 2015, neither adults under the age of 24 nor full-time students of any age are charged any fees for using Acorns — no fees on any accounts of any size.
Acorns suggests students sign up using their .edu email address and list their employment status as ’Student’ to make the process easier.
Students are looking at saving $1 per month for accounts under $5,000. For accounts over $5,000, students will save 0.25%.
Students’ fees will be waived for the duration they are in school. If you are a student, or are a parent to one, take advantage of this unique student discount.
What Would Make Acorns Better?
A major drawback is the funds in the investment account with Acorns is taxable, because the funds transferred are after-tax money. As a young adult starting a career, a tax-deferred 401(k) plan with a company match is a better investment than putting money into an Acorns account. It would be nice if they offered an IRA account in which you can start retirement savings. It’s been reported 20% of employees do not have access to a retirement account, and Acorns could easily fill this need.
Pros
- Painless Way to Save — Since the amounts taken out of your account are small, you won’t notice them missing from your checking account.
- Hides the Complexities of Investing — You don’t need to understand Modern Portfolio Theory to use Acorns.
- Start Investing With No Money — Acorns doesn’t have a minimum deposit to start using their service.
Cons
- No Retirement Accounts — Unfortunately Acorns does not have the option to put your savings into a traditional or Roth IRA account. All investing is taxable.
- Only for "Boosting" Your Savings — Acorns savings amounts aren’t really suited to save the 5% to 20% annually you need to put towards retirement or larger goals.
- Can Lose Principal — It is possible to lose money with Acorns, though the recommended investments are pretty conservative.
Summary
Acorns is a good start if you have little to invest or need a nudge to start investing without affecting your lifestyle, though the monthly deposits are way too small to be considered a serious method for saving towards retirement.
Betterment is a better option for larger deposit amounts with lower annual fees, and it offers retirement accounts. In response to Acorns’ microsavings service, Betterment has introduced SmartDeposit, automating investing once your bank account is above a specified dollar amount.
Betterment, rather than Acorns, is our recommended investing service for beginners. However, there is nothing stopping you from using both services to boost your savings rate. Ultimately, most individuals don’t save enough for a rainy day, and Acorns will help start you down this path.
Disclosure: For testing purposes, I opened an account with Acorns.
Comments
A LOT of people here in the comments are hating on this app for not the best reasons. For instance There are people griping about the dollar a month fee. Consider that e trade (which I love) is $10 commission fee to buy shares and another $10 commission fee to trade them. It doesn’t mater how many shares you buy the fees are static. Now in order to make money on the trade you have to come above the $20 in trading fee’s. You do this for every stock, not just one. You have to do at least a trade every quarter or they charge you more. Am I bashing Etrade I think not, the point is if you don’t want to do research or put up with the stress of losing money(which does happen) I don’t think you can whine about the $1 a month fee. People here need to look up Capital Gains Tax the definition and thank the idiot in office who raised it.
Installed app, registered all my accounts, and absolutely LOVE it!
I chose Moderately Agressive setting and to date been making money on my investments – genius idea!
What do you mean the funds you deposit are taxable? No… you’re taxed on the gains like you would any other investment, but you’re not taxed any more on your deposits than you would be if the money just sat in your savings account. Acorns won’t make anyone rich, but it’s a much better place to put your money than a savings account.
By the time the money hit your checking account, it was already hit by federal taxes. In contrast, a 401k is pre-tax income. So yes, the funds you invest in this app are taxed, before you invest them.
I had Acorns since their (disastrous) start and I closed my account this week. This is due to the fact that I was being charged a $1 a month fee and earning less than $0.02 a month in dividends. Not a rocket scientist, but those returns are abysmal even when the investment strategy was tweaked and the investment principal was hiked to see if the returns are worthwhile.
I do also wish that the app did not show my round up deposits as if they were “gains” on the home screen, so it was quicker to see if I was actually up or down. It takes quite some time to switch screens (at least for me). I also agree having a 401k option would be amazing, especially for my under 30 demographic, where most of us are switching jobs often, or companies make you wait to open one until after a probation period.
I’m loving this app, its allowing me to save decent amount of money, without trying very hard. I quit smoking few months back and instead of spending money on cigarettes, I set up weekly transfers for a fraction of what that used to cost me. So, $25 a week in auto transfers along with the roundups, gets me somewhere close to $2000/year in savings. In 7 months, the dividents collected have very close to covered monthly fees ($6.83 vs $8), and aggressive portfolio has made me $57.87 or 6.29% return. Seems like a pretty good deal to me.
With that said, I would recommend acorns to those who have a hard time saving money to begin with or as a secondary method of savings for retirement or otherwise. For those that have been saving for years, and have good chunks of money set aside, I would suggest going a different route.
I just set up my acorn account and don’t remember reading anything about fees…
Hi Lorraine, They certainly do not do it for free.
There is a section of the agreements titled fees. #2 I believe.
Love my ACORNS account. Easy to use and self explanatory. Better than a savings account.
I just applied for an account. I’m curious to see what this thing does. I am looking for investments that are Aggressive and intend to use the dividends to pay down (off) student loans, mortgage, etc. Total lark on my end, kind of looked at investing in the past and know nothing about it. I’m hopeful that things will work out, but I’m not putting a huge sum into this if things fall through. The fee structure seems reasonable enough, but without a frame of reference it doesn’t really matter to me.
You probably won’t make anywhere near enough in dividends to pay down student loans, a mortgage, etc. Unless you’re already dealing and investing with large amounts of income. Acorns is better to consider as a second savings account. That in 10-15 years, if you save $10,000 of your own money, you probably will have $11,000 (10% gain if it’s been really really good) but likely closer to $10,500 (5% gain). And you could even end up with $9,500 (losing $500). Just don’t withdraw that $500.
Is there a cap on the investment & how does the money get withdrawn, is it a auto withdraw? Or do we transfer the money to the Acorn account, what is the interest amount crediting amount at this time? You said THERES no penaltys at withdraws? What’s being taxed is only on the gain but not on the amount being invested correct? Because amount being dep is after taxes correct?
Is this only for investing in retirement? What if I wanted to save for a vacation in 5 years. Would this be a good way to do it or would a savings account have easier access to withdrawl?
It can be used to save for anything.
Hi Carrie,
Do you have to have an online banking account set up with your current bank for this to work?
Someone asked about performance. I use the most aggressive AA. Since 1972 it has returned 8.3 real CAGR with a SD of 14%. Compare to a similar portfolio (89/11) which has a 5.8% real CAGR and 16% SD. Historically more return with less risk.
I love Acorns so far! I have a $10/week recurring deposit on top of my round-ups and I barely notice the money coming out. My account has earned $40 on top of my investments since I started it 5 months ago.
you will pay taxes on the returns if you withdrawal. Do ppl think you won’t pay taxes on a 401k when you withdrawal? Uncle Sam will force you to withdrawal money from a 401k at a certain age because why? Because they want their tax money they deffered from all those years. If you don’t withdrawal by a certain age, they will just tax you on the entire amount in your 401k. So half a dozen in one hand, half a dozen in the other.
If you pay to have taxes prepared: you pay per each form/investment info filed to the tax preparer. Assuming that Acorn investment is a round up change and small deposit. Will what I’ll make with Acorn on such a small scale plus their fees worth it the tax preparation fee? That’s something that should be considered.
If you wanted to uninstall the app, is there anyway to insure that all your information is deleted too?
Due to legal reasons, you can disconnect your bank account from the app and withdraw your money, but your information is not deleted from the company’s database immediately. I received this reply from the company directly:
If you still prefer to close your Acorns account, simply complete the following steps. More details on each step can be found in our app guide.
Unlink all your Round-ups Accounts.
Turn off all Recurring Deposits on the “Deposit/Withdraw” screen in the app (under the “Recurring” tab). Press the circle with the square in it (stop), and then select “Stop” when prompted on the next screen.
Cancel all pending investments in your Acorns account, on the History screen (under the “Pending” tab).
Withdraw all funds from your Acorns account on the “Deposit/Withdraw” screen. Please allow 5 business days for processing due to the industry standard settlement period.
After completing these steps, your account will be inactive until early next year when tax reports are sent out. At that point your account will be considered closed. For compliance reasons, all application and account records are required by law to be retained for 6 years.
I installed the app – then read the “Agreements” – I’m confused. There are all kinds of Fee’s listed – $40 for domestic wire transfers, $150 for outgoing or in-kind withdrawals of shares, and wrap fees… What is all that?? I’m incredibly new to all this (target investor group), and it’s got me spun. It looks like I end up paying a lot of money if I want to withdraw my “winnings”… Or any amount in my account actually.
Can Acorn be routed in to a mutual fund and how is it done
No you are using the selected funds the have available in their service.
Hi Carrie. Thanks for this overview.
Just curious if, after using the app for some time, what you, or anyone else who reads this, thinks in terms of the success of Acorns portfolios since they started using the app.
Great question, Seth. They offer variations of portfolio make-up based on your personal information (like age), and tolerance for risk. So far I’ve found this very successful once I chose my preferred portfolio make-up. I haven’t changed anything since I started investing with Acorns.
REIT allocation is pretty high; still it is fairly in line with MPT.
I just made an acorns account. However my bank already keeps the change and places it in savings. How does this work with acorns doing the same thing?
Hi Carrie,
Silly question about the Acorns fee’s: the 25% fee for investments over $5000—that’s 25% of the dividends paid out, not total end of year account holdings, correct? (new in this investment world- sorry if it’s a goofy question).
Thanks
Hi Suzen,
The fees charge is what is held in the account. i.e. if you have $6,000 in an account they charge 0.25% of that amount. I believe the fee is taken out monthly, not annually.
I really like the service, but their fees are a bit high until you have several thousand dollars in them. It isn’t until you hit $4,800 that your fees hit the 0.25% level at $1/mo, and if you have $1,000 in there, the $12 represents 1.2% in fees, which is really high. After accumulating $600-$700 through the normal process, I dumped $4,500 into my account to drop the fees and see how it does with investing.
I’d like to see them cut their fees even further, but I guess that will come with more critical mass. After
So far, I like my ACORNS account because ive only seen positive returns. makes it easy investing spare change from whole dollar amounts. Great idea. just hope the positive returns stay lol
This is a great app if you are the developer. He makes money no matter what. I have done nothing but lose money with this app. Partly due to the market but also the monthly fees. I’ve given it a year and I am almost to the point of closing my acorns account. I might not make a lot of interest with my money sitting in my bank savings account but at lease I am not losing it..SO far in a year just inventing spare change I’ve lost over $6.00 in the market and paid $12.00 in fees. Even is the market was up the fees would eat up any profit unless you invest more than just spare change….
I have read several review on Acorns service but I have not seen actual/fictional account performance information. If it has not been published it would make an interesting piece on how an actual or fictional account based on their historical data would have performed over time.
The reason is time of entry into Acorns, amount put in and which portfolio was chosen. Therefore cannot give performance metrics.
can you link a credit card? Who make purchases from their checking account these days?
Yes you can and must link a credit card in order to do the round-ups.
Actually, you can link just your bank accounts to it and it works fine. All debits done with a debit card are tracked and rounded up just the same, as are transfers, interest deposits, ebills, etc.
I don’t use credit cards, and I am still investing about $50/mo with Acorns with the round ups.
Worse idea ever, I started 3yrs ago, and decided to make a recurrent deposit every week, along with the round ups, I thought I was making a good move, but then the second year I lost $198, and then last year 2015 I lost $315, if I haven’t done any of this investments I could still have $513 in my pocket
$1 a month doesn’t sound like much but once you do the math you’ll realize it eats your gains for almost 2 years. You’re better off getting a savings account
Do not even bother. I set-up two accounts for the round up program.The experience was horrible. Customer Service acknowledge that they debited money from the wrong account but would do refund me for my overdraft fees ($105). They said my bank could waive the fees. No, Acorn made the mistake so they should pay. I closed my account and began to write this review. I will go back to my banks “change to save program” it works far better.
Can I use the app just to save money and not invest at all?
There is not FDIC insured option that offers a guaranteed fixed returns. They do have corporate bond funds, and government bond funds as options to earn a stable return.
I started using this app in december 2015. While it’s not making me rich by any means it is an easy way to save extra money without having to remember to do it. Just use your debit/credit card like normal and you’re off.
I started an Acorns account about 6 months ago and I like the idea of it. It’s kind of like the Christmas club my parents had when I was young. You save little by little and never miss the small amounts you put in.
This is an app for people who are just out of college and have no idea about saving. The articles and advice in its Grow Magazine are pretty lame. They don’t show much creativity or insight.
Can I set up an UGMA?
UGMA is not available.
I have been using acorns for a little over a year now(started it just to see if the returns would beat a traditional savings account) using just round ups with the most aggressive portfolio. I have just about 700 dollars invested, about 60 dollars of which just from returns and dividends. I am also taking advantage of their no fees for students promotion . I find that after a year my experiment with acorns has been a success, it has helped me save money that I would of otherwise just spent, and has beat the return I would of had with a savings account by almost 8%. I would highly recommend this especially if you are a student or under the age of 24 to take advantage of the no management fee promotion.
One thing I would like to add, if you are a beginner that has very little knowledge with the investment world, I found that after I started investing I began to read more articles and try to grow my understanding of the investment world, so the knowledge I have gained alone has made this little experiment well worth it.
I hope this helps those that are unsure on whether or not to try something like this out.
I use and love this app, and recommend Acorns to my clients all the time. It is amazing simple, and flawless. It is a mindless way to save a little extra money, and make a better interest rate than a standard savings account. I also like the fact that it is just a little harder to gain access to the money than having it in my bank.
I have read many reviews for this app, and every single one of them have the exact same pros and cons, and the cons don’t make any scene to me. How can having no retirement account be a con when they never said their system was a retirement account? Acorns is exactly what they say it is, a mindless way to save some extra change in a clever way using round-ups and at a better interest rate then a standard savings account.
Acorns is just what it says it is a savings account. The type of account you would use to save for a vacation, or Christmas presents, not retirement. I use Acorns as a tool in my system BreadCrumbs to Financial Freedom to help my clients save and store their $1000 rainy-day fund.
If I want to start a retirement account I go to another institution seems simple to me and not a con.
Hi Paul the reason at least why we list it as a ‘Con’ here is because the demographic Acorns (and the other services in this category) is targeting – Millenials. Since that demographic is young by nature now is the time to focus on saving for retirement since time is on their side. In addition of some tax savings as well.
Great info, read this just as I was about to set up the account. This is very helpful in deciding if it’s right for the individual investor. Love that this is a mobile app but desktop option will be great as well.
I’m still confused about the round up account. Do I have to open a 2nd account if all I have is my checking account? Do I need a seperate savings account or another checking account?
I was confused about that in the beginning too, Tim. But basically you just link to your current checking account (I linked it to our personal bank account) and it will start rounding up the transactions you make through that account. So you don’t have to open a new one.
In the agreement letter, I saw a $150 fee for withdrawal of funds but it wasn’t clear whether that was for each time I transfer monies. Are there fees for transferring funds back to my checking account?
I just signed up the other day and added a deposit and also just entered a recurring payment of $5 each week. I was wondering where does my money go as in is it an a bank acct or something? The reason i ask is what is accorns ever goes out of business what would happen to all the round ups and recurring payment that came out of my bank acct where would i go to withdraw my money?
Acorns is SIPC Insured.
For you John the app is free to use since you are under 25. Investments are NOT FDIC insured and means it’s possible you can lose principal depending upon what it is invested in. So it’s possible that you put in $50 and get back $45, or could get back $55 depending upon market returns. Though do have the option of how conservative or risky you want to invest. Keep in mind you have time on your side at 18 so you have a chance to be more risky with your money than say someone at 65. Also take into consideration what you need the money for and from how long from now. If it say 20+ years you are best to put it into something risky because more than likely the market will be higher than now. If you say needed it only one year from now than you should put it into more conservative investments (ie bonds).
Hope this helps.
Acorns ties to your credit card and then takes the round up from your checking account.