Start Investing With Just $5 With Acorns

By Rashmi Goel
 
There are many money apps and new fintech companies available today, which makes keeping track of them difficult. Only a few achieve success and become household names. The majority of them do not offer anything unique or better than the rest. There are four apps included in Acorns: a Robo-advisor, a micro-savings app, a checking account, and a cash-back app. Acorns is interesting because it does all of these things - and is worth considering. And it does them well. The company has over 9.25M customers.

The Acorns app is a multifunction financial app that provides automatic "micro-savings", investment portfolios, a checking account, as well as a shopping coupon, and a cash-back tool. With Acorns, you can choose from five different products: Invest, Later, Early, Earn, and Acorns Checking. There are several different Acorns products, each of which can work independently or in conjunction with the others. Providing an easy-to-use checking account, Acorns Checking is a great choice. With Invest and Later, you can set up recurring deposits in addition to rounding up your purchases with the spare change going toward your portfolio. Acorns Checking offers a number of features, but Smart Deposit is one of the most valuable. This feature allows you to set up your direct deposits to automatically split between your checking, savings, and investment accounts. All members of Acorns have access to Earn, Acorns' shopping savings and cash-back tool. Through a free Chrome extension, you can automatically earn cash when you purchase from one of the nearly 10,000 participating brands. With Acorns, members have all of the tools they need to set money aside for the future, whether they use one or all of the features.

What Is The Working Principle Of Acorns?

⦁    The Acorns product, Invest, serves as the foundation of the company. Robo-advisor Acorns Invest manages your money for you in one of five automatically-managed investment portfolios. Despite the fact that all Robo-advisors allow the investor to schedule automatic investments from a linked bank account, Acorns Invest allows the investment of micro-investments as well. It is possible to schedule automatic investments on a daily basis. However, you may also enable "Round-Ups". When you sign up for Round-Ups, Acorns will automatically round up purchases made on your linked accounts and invest the difference. Invest works similarly to Acorns Later, but also allows IRA investments for retirement. As little as $5 can be automatically invested in your Later account.
⦁    Checking with Acorns comes with a cool tungsten metal debit card as well as all the features of an FDIC-insured account. Automatic investments can be made instantly with the Checking account. A Smart Deposit automatically sets aside money from your deposits before you spend them. This is a built-in, automatic way to pay yourself first. 
⦁    It is a suite of cash-back and savings tools designed to assist you in saving and earning money in your daily life. Over 350 top brands, such as Apple, Airbnb, Hotels.com, Nike, Walmart, and more, offer special pricing and cash-back deals through the use of debit and credit cards or Chrome browser extensions. Acorns Earn also offers tools that will assist you in finding a better-paying job or even a side hustle.
⦁    Savings for one or more children's futures can now be made with Acorns Early's UTMA and UGMA accounts.
How Much Does Acorns Cost?

There are no hidden fees with Acorns. "Personal" plans cost $3 per month, and "Family" plans cost $5 per month. As part of the Personal plan, you will have access to Acorns Later and Acorns Checking, as well as an investment account. UTMA/UGMA accounts are unlocked for multiple children as well as Acorns Early, at $5 per month. In the law, these acronyms stand for the "Universal Transfer to Minors Act" and the "Universal Gifts to Minors Act". Most states allow UTMAs to set aside money for the future of children and provide modest tax benefits. There are no restrictions on the use of funds in these accounts, unlike 529 plans. 

Acorns' Unique Selling Point

⦁    The most unique feature of Acorns is the ability to link your credit and debit cards to the application and have it round up your purchases and invest the difference. The Acorns platform downloads your associated credit and debit card purchases and calculates the spare change from purchases. Once the change exceeds the $5 threshold, the Acorns platform withdraws the money from your checking account and invests it. It is not necessary to use the Round-Up feature to invest; however, it is a nice touch in line with my belief that saving and investing should be automatic. This is the purpose of the Round-Up feature.
⦁    One of the great features of Acorns Checking is Smart Deposit. With this feature, you can have a portion of your paycheck or other regularly scheduled deposits automatically deposited into your investment or retirement account.  By using Smart Deposit, you are paying yourself first. Prior to reaching your checking account, your money is invested for you.
⦁    Acorns Earn allows you to earn bonus investments when you make purchases at participating merchants via a linked credit or debit card or by using the Chrome browser extension. There are different bonus rates for different merchants. Within 60-120 days of your purchase, Acorns will automatically credit your investment account with the bonus.
⦁    Acorns isn't just about investing money for your future. ESG (Environmental, Social, and Governance) portfolios from Acorns allow you to invest in companies you truly believe in by adding sustainable companies to your portfolio. 
⦁    There is no additional charge for Acorns' simple monthly pricing. There are no trading fees or commissions associated with Acorns Invest. The Acorns Checking account is free of overdraft fees, maintenance fees, or ATM fees at any ATM in the Allpoint network (55,000 ATMs nationwide).
⦁    Acorns can assist you if you have been charged for insufficient funds or interest on the purchase. By identifying unnecessary banking fees, Acorns will provide you with the tools necessary to dispute them thanks to built-in technology from Harvest by Acorns.

What Are the Best Users of Acorns?

⦁    A savings plan that is difficult to follow.
⦁    There isn't much money you have to invest and you haven't invested before, but you're interested in starting something.
⦁    Investing and savings apps that are easy to use would be great.

Acorns have the potential to be a beautifully simple tool for managing your money. With a single app that offers investment, checking and retirement accounts, there is no need for additional apps. An interest-bearing FDIC-insured savings account is the main thing that is missing. It is actually surprising that Acorns does not offer this functionality. It is becoming increasingly common for Robo-advisors such as Betterment and Wealthfront to offer savings accounts.

Why Shouldn't Acorns Be Used By Everyone?

Investors who would like a high degree of control over their portfolios should not use Acorns. It is not possible to trade individual stocks or options with Acorns as you can with Robinhood. There is a limit of five pre-designed portfolios that you can select from. It should also be noted that Acorns does not replace an emergency fund that is held in an FDIC-insured savings account. With the Acorns Personal plan, your money will be stored in one of two ways: a checking account that doesn't earn interest or an investment portfolio consisting of stock and bond exchange-traded funds (ETFs).
An investment account is not like a savings account in that it can lose value over time. Investing in them over the long term is the best way to grow your money, however, they can be volatile in the short run. It is essential that your emergency savings be available when you need them. Investing in an investment account is a great way to save for future goals. However, you should always keep some cash in an interest-bearing savings account in case you need it in a hurry.
If you will take a long time to invest $5,000 or more, you should carefully consider using Acorns Invest over a different Robo-advisor. What are the reasons for this? It is common for Robo-advisors to charge an annual fee based on a percentage of your investment. It is common for companies to charge 0.25%. Compared to the $12 you'd pay with Acorns, that comes out to just $2.50 per year on a $1,000 investment account. There is a breakeven point of $4,800.
However, the interesting thing about Acorns Invest is that as your investment balance grows, it becomes increasingly attractive. Regardless of how much your balance grows, you still pay just $12 per year with Acorns, while the other guys charge $250 per year. Acorns do not offer additional investment features such as tax-loss harvesting and Smart Beta, which are offered by other Robo-advisors. IRAs are also not charged extra like Acorns. Before Acorns Later becomes cheaper than its competitors, you must have an account balance of $14,400.

Pros & Cons

Investing only takes a few minutes and doesn't require any prior knowledge of the stock market.     Acorns is more expensive than its competitors when it comes to investment accounts under $4,800 and retirement accounts under $14,400.
It is possible for even hapless savers to put some money away by using the Round-Up and Smart Deposit features.    There are several other Robo advisors that offer richer features and allow a greater level of portfolio control
It is possible for even hapless savers to put some money away by using the Round-Up and Smart Deposit features.    The features available with other robo-advisors are more extensive and you have more control over your portfolio.

Competitors Vs. Acorns

Stockbrokers and Robo-advisors are numerous. However, Acorns is not directly competing with most of these firms. The primary objective of Acorns is to assist new investors in acquiring an investment habit. 

Stash

In a similar fashion to Acorns, Stash offers a user-friendly investment account for just $1 a month. The Stash platform differs from Acorns in that users can invest in fractional shares of any stock or exchange-traded fund (ETF). Buying fractional shares allows you to buy just $10 worth of Apple stock, for example, even though the stock trades above $100. With the $1 Stash Beginner plan, you will receive an investment account and a checking account with a debit card, and there will be no hidden fees. In order to add a retirement account, you must select the Stash Growth plan at a cost of $3 per month. One of the most expensive plans is Stash+, which adds two investing accounts for kids and doubles the amount you earn with debit card purchases when you use your card to purchase stock.
In the event that you are not interested in opening an IRA through one of these applications, Stash offers both an investment account and a checking account for just $1 a month. Acorns charges a monthly fee of $3 for its checking accounts. Stash, however, does not offer the Round-Up and Smart Deposit features that make Acorns so appealing to users who wish to put money aside for investment purposes. Acorns Family plan is a better deal when compared to the Stash+ plan unless you plan to use the Stash debit card extensively. Accessing two-child investment accounts costs $4 more per month than Acorns, which does not limit the number of children. If you plan on spending a lot with the Stash debit card, then you might want to consider the Stash+ account because you'll get 2% back. 

Wealthfront

This Robo-advisor is designed primarily for long-term investors with substantial balances. It isn't directly competing with Acorns, but a comparison might be useful. There are both checking accounts and investment accounts available through Wealthfront. There is a $500 minimum investment requirement for Wealthfront investing accounts, and the annual fee for these accounts is 0.25% of your invested assets. This equates to $2.08 per month for every $10,000 invested. For larger balances, Wealthfront's investing accounts are significantly more expensive than those offered by Acorns or Stash. However, you also receive a greater value for your money.
All Wealthfront accounts, for example, benefit from tax-loss harvesting, a feature that allows you to strategically sell underperforming investments in order to reduce your capital gains tax. The client who holds an account with $100,000 or more is entitled to more powerful tax-loss harvesting at the stock level, as well as an enhanced asset allocation strategy is known as Risk Parity. In accounts with $500k or more, the Smart Beta feature, which utilizes artificial intelligence to fine-tune the allocation of stocks in the future, becomes available. It is possible for all Wealthfront users to take as much control over their investments as they wish by adding or deleting ETFs as they see fit. As an alternative, you can construct your own portfolio by investing in ETFs that have been vetted by Wealthfront's team, or by investing in its US Direct Indexing Strategy. 
There is no charge for Wealthfront's checking account and at the time of writing this review, the account was paying interest at 0.85% APY. In order to open an account, a $1 deposit is required. The Self-Driving MoneyTM feature of Wealthfront can automate the payment of bills and the transfer of funds between savings accounts and investments. It is also possible to organize your money into specific savings buckets, such as an emergency fund and a vacation fund. Wealthfront's annual fee of 0.25% is less than Acorns' flat $1 monthly fee for investors with balances less than $5,000. Acorns become less expensive after that. Nevertheless, investors with balances over $100,000 may benefit from Wealthfront's advanced investing features - potentially offsetting the increased fee. The reason for this may be that everyone will experience different returns on their investments.

Conclusions

Competitors of Acorns offer both lower prices and greater services. You are unaware of any other product that makes it easier to begin investing and develop an investment habit. The stock market does not require any prior knowledge on your part. As little as $5 can be invested at a time - literally, the spare change left over after a few debit card purchases. Moreover, you will earn bonus investments while you are shopping, with the background tracking of your spending. The Acorns program is not suitable for everyone. Stock traders or investors who simply want more choices in their portfolios should consider other investment options if they are interested in trading stocks. The more your balance grows, the more likely you are to be able to afford features that may increase your return. It is important to note that Acorns is an excellent product for those who are new to investing or are looking for a painless way to increase their investment portfolio every month. A single app could also simplify your finances by keeping track of your everyday checking account, IRA, and investments all at the same time.