I've had great success using the savings/investing app Acorns. Today I'm going to go through exactly how Acorns work. If you're looking for some tips on how to get the most out of Acorns make sure you check out this post.
How does Acorns Work
Acorns uses a concept which they call “Roundups”. The ideas is pretty simple. Whenever you make a purchase using your bank account (or attached debit card, apple pay etc), Acorns will Roundup to the nearest dollar and transfer this amount to your investment account.
So, say you buy a coffee for $3.70. Acorns will roundup to $4 and transfer $0.30 to your Acorns account.
Acorns waits until you have $5 worth up roundups before transferring the money. This is do your account doesn't have hundreds of direct debits which might upset your bank.
The more you spend, the more money that you'll end up saving.
How is your money invested
Your money is invested in a portfolio put together with the help of nobel prize winning economist Dr. Harry Markowitz. The portfolio is made up of a broad range of stocks and bonds. You can choose how aggressive or conservative you want your portfolio to be.
Depending on your spending habits, you may find that you're not saving as much as you would like. Acorns gives you the option to setup recurring payments (daily, weekly, monthly etc). Think of these as additional top ups. If your using Acorns as you're primary investment account, then I would recommend making use of these. You're also able to transfer one off payments as well.
How does Acorns compare to traditional funds
traditional funds usually require you to start with $10k or more. With Acorns you can get started with just $5. Traditional also charge very high fees. In comparison, Acorns charges just $1 per month for accounts with less than $5k in them. And once you push over the $5k mark you'll pay just .25%!! This is much less than traditional funds.
Another big advantage of using Acorns is how well the app is designed. All your interaction with Acorns can be handled through the app. You don't need to worry about spending hours on hold trying to talk to someone. And you can withdraw your money at anytime, with just a couple of taps. The app makes it easy to see how much your money is growing, where it's invested and what it will grow to into the future.
If you're a millennial then you should be using an app like Acorns. Don't let your money sit idle in a bank account when it could be working for you! An app like Acorns makes saving automatic and easy. Just how it should be.
Do you use Acorns? Do you use an Acorns competitor? Let me know your experiences in the comments.