The Bottom Line: Acorns merges the robo-advisor model with an automated savings tool, making it easier to build a nest egg. But whether Acorns' flat fees are a pro or a con depends on your account balance: $1, $2 or $3 a month sounds cheap, but can be a high percentage of assets for investors with small balances.
Raise your hand if you had a piggy bank as a kid. Yeah, me too. (Virtual high-five!)
I spent the better part of my childhood digging through couch cushions looking for spare change to add to my piggy bank. When it finally got full, I’d dump out its contents, roll up all the coins, and head to the bank.
Fast forward to today, and people aren’t carrying around cash like they used to (I mean, I haven’t found any loose change in my couch in years… the agony).
Account Minimum: $0
Fees: $1 - $3/month
Promotion: Up to 4 Years (free management for college students)
So what do you do when you still want to save your digital “spare change” at the end of the day?
That’s where Acorns comes in.
What Is Acorns?
Acorns (cleverly named, I must say) is a micro-investing app that lets you squirrel away your spare change for long-term savings.
Their system automatically rounds up your debit and credit card transactions to the nearest dollar and then invests your change into a portfolio of exchange-traded funds (ETFs).
They even rebalance and reinvest your dividends as needed.
The Acorns app was created with one purpose in mind: to take the fear out of investing. With Acorns, investing doesn’t have to be scary or intimidating.
They simplify the process through their automated services and take care of everything for you.
Who Is Acorns Designed For?
Acorns claims they’re built for the “up-and-coming” and it’s true. Spend 5 minutes on their website and it’s clear that Acorns was created for the tech-savvy Millennial (they even wave their Acorns Core fee for college students for up to 4 years).
All investments are managed through their sleek mobile app, making it easy to do everything straight from your smartphone.
If you’re new to investing and looking for a simple and fun way to get started, Acorns may be just the thing you’re looking for.
How Does Acorns Work?
You fund your Acorns account with “round-ups.” When you make a purchase using a card that’s linked to your account, Acorns automatically rounds your purchase up to the nearest whole dollar.
It then withdraws the difference from your bank and invests the spare change into a portfolio of your choice.
Here’s an example.
If you go out to eat and spend $21.04, your total is rounded up to $22.00. Acorns takes the $0.96 difference and adds it to your round-up balance.
Once you have at least $5 in round-ups, the money is withdrawn from your bank account and invested in your Acorns portfolio.
By default, Acorns automatically rounds up every purchase you make. If you’d like to pick and choose what purchases get rounded up, you can turn off automatic investing and invest manually instead.
If you don’t like Acorn’s “round-up” feature, you can also opt to manually transfer money into your account. But in my opinion, turning off this feature defeats the whole purpose of what Acorns does best.
In 2017, Acorns introduced Round-Up Multiplier which lets you magnify the amount of money you save up to 10x.
So instead of Acorns setting aside $0.96 from your dining out purchase, it could set aside up to $9.60. Cool, right?
Acorns Account Types
Acorns offers personal investment accounts, retirement accounts, and checking accounts.
You pay more for each of these services (anywhere from $1-$3 per month). Read the pricing breakdown below for more information.
Pricing: Acorns Account Fees
Acorns pricing couldn’t be any more straightforward. Unlike most robo advisors who charge a percentage fee, Acorns has a flat fee of $1, $2, or $3 a month depending on what plan you buy.
It’s totally free to open an Acorns account, but you’ll need at least $5 to start investing. Acorns doesn’t charge any other trading fees, transfer fees, or closing fees.
There aren’t any secrets; the price you see is the price you pay.
Acorns Core ($1/month)
Exactly as it sounds, this plan gives you access to all Acorn’s core investing features—nothing more.
You get access to:
- The Acorns micro-investing app
- 5 ready-made portfolios
- Grow Magazine (Acorns’ education center)
- Found Money (Acorns’ cash back program)
Acorns Core + Acorns Later ($2/month)
Want to open a retirement account with Acorns? This second tier may be for you.
In addition to all the features you get with the $1 plan, you also get:
- A separate account to manage your retirement dollars
- Recommended IRA and portfolio options based on your specific needs
- The option to set up recurring contributions
- Automatic rebalancing as you approach retirement
- Rollover assistance if you have an existing IRA or 401(k)
Acorns Core + Acorns Later + Acorns Spend ($3/month)
This is the most expensive plan offered by Acorns at $3 per month, but it’s also the most holistic plan.
In addition to Acorns Core (personal investing) and Acorns Later (retirement savings), you also get access to Acorns Spend—a checking account meant to integrate seamlessly with other Acorns products and services.
With Acorns Spend you get:
- All the features of a modern checking account (direct deposit, mobile check deposit, free ACH transfers, and free or fee-reimbursed ATM usage)
- Up to 10% cash back from retailers outside of the Found Money program
- Strategies for how to save while you spend
- No overdraft or minimum balance fees
Note #1: If you have $1 million or more to invest, Acorns recommends reaching out to them directly because the fee structure is a little different. As of right now, the fee is 0.25% annually for accounts of $1 million or more.
Note #2: Before April 2018, Acorns had management fees based on your account balance. Under the old structure, you paid $1 per month for assets under $5,000, and 0.25% for assets of $5,000 or more. (Just wanted you to know in case you see old info floating around the inter webs.)
Investing With Acorns
Through the Acorns app you can view your portfolio, track your performance against that of the market, and more.
Acorns has 5 ready-made portfolios to choose from depending on your risk tolerance. Each portfolio is made up of low-cost iShares and Vanguard ETFs covering 5 to 7 asset classes.
Acorns’ small number of asset classes can feel inadequate compared to other robo advisors like Betterment who offers 12 asset classes. If you want more options, consider looking into another platform.Acorns investments are SIPC insured, but their not FDIC insured. Returns are not guaranteed and you could lose money. Acorns currently has almost 4 million users.
5 Types Of Acorns Portfolios
Acorns recommends an investment portfolio after you answer questions in the account set-up process (like your age, income, years from retirement, and so on).
You don’t have to go with their recommendations. You’re free to choose any portfolio you want to.
Portfolio 1: Conservative
Portfolio 2: Moderately Conservative
Portfolio 3: Moderate
Portfolio 4: Moderately Aggressive
Portfolio 5: Aggressive
These portfolios were created by Dr. Harry Markowitz, a Nobel Prize-winning economist. They’re structured with exchange-traded mutual funds (ETFs) from companies such as Vanguard and BlackRock (who manages iShares).
Acorns: Unique Features & Benefits
Ahhh… Acorns’ claim to fame. For each purchase you make, Acorn rounds-up the amount and invests the difference.
You squirrel away $0.50 on this purchase, $0.75 cents on the next, and $0.30 cents on the next. Pretty soon all your little acorns have added up and you’ve got real money to invest.
Just when you thought it couldn’t get better, Acorns lets you choose how much extra to invest. Instead of just rounding up to the next dollar, you can multiply the total amount of your spare change up to 10 times.
If you have $0.25 in spare change from the movie ticket you just bought, you can multiply it by 10 and invest $2.50 instead.
Acorns’ mobile app is in a league of it's own. They’ve won several awards for having a sleek, sexy, easy-to-use interface.
While other robo advisors may have mobile apps, Acorns is a step above the rest.
Found Money Program
Found Money is Acorns’ cashback program. It features over 250 top brands including Blue Apron, Airbnb, Nike, and Disney—their site says they’ll be adding even more brands in the future.
You can earn cash back through Found Money in two ways. First, every time you use a card linked to your Acorns account, you’ll earn cash back.
You can also download the Found Money extension for Chrome and earn cash back as you shop through your browser.
The drawback? These funds take anywhere from 30-120 days to hit your account.
Acorns Spend (Checking Account)
Acorns Spend is a checking account offered through a partnership with Lincoln Savings Bank.
With your Acorns Spend account you can view round-ups in real time and automate your retirement savings.
Your Acorns Spend debit card is free to use at ATMs nationwide (they’ll reimburse you for any fees). Your account is FDIC insured up to $250,000. Acorns Spend is $3 per month.
Acorns Later (Retirement Account)
Acorns Later has 3 Individual Retirement Account (IRA) options: Traditional, Roth, and SEP. They select the right IRA for you based on questions you answer when you set up your profile.
The cost of this service is an additional $1 per month. Once you have $1 million or more in assets, the fee changes to $100 per $1 million.
Grow (Acorns’ Education Center)
Acorns has loads of helpful content on its website and app. Their advice goes way beyond just investing.
From help with your side hustle to saving money on energy bills, they’re eager to help you solve all your burning personal finance questions.
This education center serves as a great resource for those who want to be savvier with their money but don’t know where to start.
In addition to round-ups, you can invest lump sums of money by setting up recurring deposits.
These deposits can be set up on a daily, weekly, or monthly schedule.
Want to give someone the gift of investing? Acorns has a gift card for that.
You can pick one up at participating stores or online.
Free For College Students
If you’re a college student with a valid .edu email address, you can get Acorns Core (the $1 per month plan) free for up to 4 years.
But beware, the reduced rate doesn’t apply to the $2 or $3 per month plans.
How To Get Started With Acorns
You can open your free account with Acorns in a matter of minutes using their website or mobile app.
Setting up an account with Acorns looks like this:
Answer some personal information
Link to your bank account
Set up financial goals you want to reach
Choose your risk tolerance
Choose between five ready-made portfolios*
Transfer at least $5 into your Acorns account to start investing
Link your credit and debit cards to your Acorns account
Easy peasy, right?
*Note: the portfolio you choose in Step 5 corresponds to your indicated risk tolerance in Step 4. The greater the risk, the greater the reward. If you choose a portfolio with low risk, you’ll typically earn lower returns (but your money is statistically safer). If you choose a portfolio with high risk, you have higher growth potential (but your money is more vulnerable to the market).
Acorns’ spare-change savings tool and its cash-back rewards program make investing easy. But the management fee on small accounts is steep.
Pros & Cons
Bottom Line: Is Acorns A Good Investment?
If you’re young, completely new to investing, unsure where to start, or don't have a lot of money to invest, go with Acorns.
Acorns has earned its claim to fame with its micro-investing system Round-Ups (and rightfully so). This system automates everything, so you don’t have to think twice about your investments.
It’s free to open an account and you only need $5 to start investing. With their flat fee structure, you always know what you’re going to pay; there aren’t any surprises.
If you only want their investment services, it’s $1 per month. If you want a retirement account too, you’ll pay $2 per month (up to $1 million). If you want all three services including their checking account, it’s $3 for the whole shebang.
But beware, a management fee of $1 per month can wreak havoc on your investments if you’re only squirreling away small amounts here and there.
For example, if you invest $300 a year through round-ups and pay $12 per year in fees (for the $1 plan), your management fee ends up being 4.0%.
This is way more expensive than robo advisors like Betterment who only charges 0.25% annually.
When you look at the numbers, you’d need at least $5,000 in your Acorns account to bring the management fee down to Betterment’s 0.25%.
Looking beyond the numbers, though, Acorns is a teaching tool for those who want to boost their savings and learn how to manage their money.
If you’re new to investing and want a fun way to save your digital “spare change” for a rainy day, Acorns makes sense for you.