Investing is the only way to beat inflation and make your money earn more money. Unfortunately, investing is all too often seen as something complicated and hard to understand or — at the very least — bothersome to get started on.
You might associate investing with heading down to the HR office and filling out a mountain of paperwork. Sometimes that is the case — for example, if you’ve opening a company-run 401(k). However, with the rise of robo advisors and microsavings apps, you can start investing in the comfort of your own home while you’re playing around on your phone.
One such app is Acorns. Acorns is a microsavings app that works by rounding up your purchases to an even number and investing the difference for you. By linking your credit card and checking account, Acorns reads your spending habits on your credit card and rounds each transaction up to the nearest whole number. It pulls the difference from your checking account and invests it in an Acorns account that you set up.
Acorns is a handy app for when you want to get your feet wet with investing. It’s perfect for the younger crowd and has proven immensely popular with Millennials. As of May 2018, there were 3.5 million people using Acorns.
For its services, Acorns charges a flat fee of $1 per month for accounts of less than $5,000 and a 0.25% fee annually for accounts larger than that.
So Acorns is easy to use, but how can you get the most out of its services? How can you maximize your usage and end up with the most bang for your buck?
Here are a few ways to get the most out of the app.
The Acorns app provides a painless way for newbies to begin saving and investing by "rounding up" their spare change and "micro-investing" the difference. However, it isn't built for long-term saving (although it is introducing a new IRA service) and charges hefty fees.
- Painless Way to Save
- Hides the Complexities of Investing
- Start Investing With No Money
- Free for College Students
- Only for "Boosting" Your Savings
- Can Lose Principal
1) Get Started While You’re in School
“The best time to start investing was 10 years ago. The second best time is today.” You might have heard this phrase before, and it couldn’t be more true. The earlier you can start investing, the more time compound interest has to work in your favor.
Acorns has a fantastic offer for students. Those with a valid “.edu” address can get up to four years of use without fees. For students with high debt burdens and/or low incomes during school, Acorns can be a great way to start building wealth for their long-term future.
Acorns founder Jeff Cruttenden holds the belief that there should be no barriers between Americans and investing.
“We understand that students carry great financial burdens, and Acorns wants to ensure there is nothing holding people back from investing. I founded Acorns because starting to save money as early as possible sets a path toward long-term financial health. We’re committed to giving young people the opportunity to grow their investments with Acorns and changing their perception of investing from complicated and inaccessible to simple and essential.”
Acorns also allows those aged 18–23, regardless of student status, to invest without fees. If you start investing at 18, even small amounts of money can put you years ahead of someone who starts investing in their mid-30s.
Acorns is famous for investing your spare change, and for good reason. It’s a brilliant idea, and Acorns makes it easy. Most people don’t know that it’s not just spare change you can invest. You can make larger contributions, and you can do so automatically.
You can set up an account to invest another small but consistent amount of money each month automatically. Combine automatic deposits with roundup investments and you’ll make a much bigger impact.
Remember that you’re paying a monthly fee to use Acorns. You’ll want your investments to be bigger than your fee to make the whole thing worth your while.
3) Boost Your Round-Ups
Acorns is well known for its system that lets you take advantage of “Round-Ups” — investing your spare change whenever you use a linked card. For example, say you spend $9.45 at your favorite lunch spot. Using Acorns, you can round up to $10 and deposit that extra 55 cents in your Acorns investing account.
Now Acorns has taken Round-Ups one step further. You can elect to boost your “spare change” amount by as much as 10 times. So instead of investing 55 cents, you can invest as much as $5.50 for that single transaction. This is a great habit to get into to save more of your money every day.
4) Use Found Money
In this case, “Found Money” doesn’t refer to any dimes or pennies you might find on the sidewalk, but rather to one of Acorns’ coolest and most potentially effective features.
Here’s how it works: Every time you use your Acorns-linked debit or credit card at a select retailer, that retailer will actually invest a bit into your Acorns investing account.
We’re not talking off-brands, either. These are businesses you’re very likely already spending money at.
Here’s a list of the current Found Money participants and the amount they’ll contribute (as of August 2018):
|Airbnb||1.8% of your service fee|
|Apple||1.2% of your purchase|
|Barnes & Noble||2% of your purchase|
|Billshark||$10 when you sign up|
|Birchbox||$10 with purchase of a 6-month or 1-year subscription|
|Blue Apron||$30 when you sign up|
|Boxed||4% of your purchase|
|Casper||$75 with purchases over $500|
|DirecTV||$25 when you sign up|
|Dollar Shave Club||10% of your purchase|
|Earnest||$100 when you refinance your student loan|
|Expedia||4% of your purchase|
|Groupon||5% of your purchase|
|Hilton||6% of your purchase|
|Jet||2% of your purchase|
|John Hancock Vitality||$5 when you sign up|
|LifeLock||$25 with a new purchase|
|Lyft||$15 when you sign up as a driver|
|Macy’s||5% of your purchase|
|MVMT||10% of your purchase|
|New Balance||5% of your purchase|
|Nike||5% of your purchase|
|Saks Fifth Avenue||1.5% of your purchase|
|Samsung||3% of your purchase|
|SeatGeek||3% of your purchase|
|Sephora||$3% of your purchase|
|shopDisney||1% of your purchase|
|Sonos||5% of your purchase|
|Stance||10% of your purchase|
|Stich Fix||$10 with a new purchase|
|The Wall Street Journal||$5 with a new subscription|
|Warby Parker||10% of your purchase|
As you can see, Found Money offers vary per retailer. The Acorns phone app will give you all the details on the offers currently available. Just make sure that your debit or credit card is linked with your Acorns account (this takes only a few minutes). Whenever you shop at one of these partner brands, they’ll put cash back into your investing account. Typically, it takes about 30 to 60 days to receive your reward.
But there is no reason not to sign up. This is — quite literally — found money.
5) Use Credit Cards With Rewards Points
If you’ve signed up for Round-Ups and automatic deposits, you’re well on your way to maximizing your use of the Acorns app. However, you can squeeze a little more out it by linking your credit cards.
Normally, we wouldn’t be fans of using credit cards. After all, a key to financial success is getting yourself out of unnecessary consumer debt.
However, if you are careful not to keep a revolving balance, credit cards that have generous rewards programs can actually boost your Acorns benefits.
Let’s say you go to Starbucks and buy a tall latte for $2.95. Acorns will round up 5 cents and pop them in your account. But if you have a Round-Up booster set that will round that amount up to $5, you will be saving even more in your account.
Now, if you’re using your Starbucks credit card for this transaction, the money from that transaction will also go toward your rewards account… meaning that on top of the extra $2.05 you’ve put in your Acorns savings account, you’re working your way toward free beverages. Do this every day, and it’s going to add up over time — for both your Starbucks addiction and your savings.
Of course, you can also use this technique for racking up frequent flier miles and even cash back, depending on your credit card program.
Other Factors to Consider
Acorns allows you to monitor how your investments are doing day to day, and data says that an average user checks the app every other day.
One thing to keep in mind no matter where you’re investing is that you have little control over how the markets behave day to day. You’ll have good days and bad days and days where nothing at all happens with your money.
Getting the most out of Acorns is less about the market’s performance and more about your financial habits.
You should also consider where you are in your career and investing levels to see how much impact Acorns can have for you. If you’re low income or just starting your career, it’ll be more beneficial for you to invest in tax-advantaged accounts like an IRA or a 401(k) rather than investment accounts you need to pay taxes on.
If you’re further along in your career but haven’t started investing, Acorns is a better fit. In addition to any retirement accounts you’ve already got set up, Acorns gives you an opportunity to increase your overall investment rate. With inflation averaging 3% annually, investing is a better use of your money than simply tucking it into a savings account.
For those deep into their career Acorns probably isn’t a good fit unless you need to play serious catch up with investing. If you’re in your 40s or later and haven’t started saving for retirement at all, you should look into how you can invest on all fronts. Acorns can be a great way to start growing your taxable investments, a key part to any retiree’s portfolio.
Overall, Acorns is a fantastic way to get started in the investing world and to build a portfolio without having to deal with the headache that can come with HR. Once you get started, use these strategies to maximize your use of the app and you’ll see your money really start to grow.