There are certain things that I just know about myself. I lose sunglasses, I procrastinate on my taxes, my dirty clothes don’t always reach the hamper and I am not naturally great at saving money. The first three, I’m still working on. The last one, I am able to put systems in place that can save me from myself and force me to put money away without thinking about it. Using automated savings tools like Acorns, Digit, Wealthfront and even Lending Club (I’ll explain how that is a savings tool at a later date), I am able to remove a lot of my natural human tendencies to procrastinate when it comes to saving money. These tools help me to build and grow my savings without even thinking twice about it or noticing that the money is moving out of my checking account. In this post, I’ll focus specifically on how I have used Acorns to save and grow my money.
How does Acorns work?
Acorns is a desktop or mobile application that allows you to automatically save money from your bank account and deposit it into your Acorns account where it can slowly grow without the need for day-to-day management of investments. Acorns makes deposits from your credit card or debit card and checking account. For all practical purposes, it is rounding up to the next dollar on any purchase you make with that card. In reality, it is not possible for anyone other than the merchant you are purchasing from to “round up” so Acorns keeps track of the purchases you make, totals the round ups and makes a deposit from your credit or debit account once you reach $5. This money then goes into your Acorns account and is invested on your behalf.
For example, if I go to lunch at my local diner and my bill comes to $7.12, Acorns would track the additional round up amount of $.88 and add that to my account as part of the next transfer that it will make.
Where does Acorns put your money?
While the savings factor alone was enough to sell me, it was icing on the cake that Acorns will wisely invest my money for me. When you create your account, you have the ability to choose from five levels of diversified portfolios. These portfolios were created by Nobel Prize winning economist and and father of Modern Portfolio Theory, Harry Markowitz, so yeah…these guys are legit. For my account, I chose to go with the aggressive portfolio since this is one of many places that I have my money invested, so I’m comfortable with that level of risk in this case.
Once you have selected your portfolio, your money is automatically invested and managed by Acorns. You have the ability to look at the breakdown of how your money has been invested and even see what dividends you are being paid by the securities in your portfolio. This is fun, but definitely not necessary. That is part of why I love Acorns so much – they provide the transparency so that if you are interested in the details, you can watch them. Or, if you are like me, you can choose to just let it grow and check back periodically and do a happy dance when you see how much the account has grown.
What fees does Acorns charge?
Like everything else with the app, the Acorns fee structure is simple and transparent. You pay $1 per month if your account has less than $5,000 in it. Once your account goes over the $5,000 threshold, you are charged .25% per year. Obviously, these fees are pretty high as a percentage of a smaller account, so in a lot of cases, it could make sense to deposit a larger sum up front to get past that $5,000 mark. In my case, I just started with a small amount to test it out and see what it was all about, so I am still small potatoes compared to the real pros. The other awesome nuance of their fee structure is that you can save and invest your money for free if you are a student or are under the age of 24.
How do you withdraw from Acorns?
One of my first concerns with the application was that I would put money into it, then have a waiting period or a penalty if I decided that I needed to take that money back out of my Acorns account. This is not the case. You are able to withdraw any amount from Acorns at any time without penalty. The one thing that can be a bit of a pain with this is that it can take 5-7 business days for the money to make it back to your checking account. They will also require a random deposit verification step where two small deposits are made into your account and you must verify the amount of those deposits with Acorns.
Is Acorns safe?
Acorns is SIPC insured, SSL encrypted and uses bank level security for their servers. I’m not sure exactly what all of that means, but it is enough to make me feel comfortable about where my money sleeps at night. Since I am definitely not the expert when it comes to online security, I would encourage you to check out their security page if you want to dive into the details.
My experience with Acorns
I started using Acorns about five months ago just to see what it was all about. I started this at the same time that I started experimenting with Digit and Lending Club, which I’ll talk about in similar posts. I didn’t have the highest expectations for it, but I have been very pleasantly surprised.
I initially deposited $10 into my account and selected the aggressive portfolio, which is mostly built with small company, emerging market and real estate stocks. I have checked in on my account using both the mobile and desktop app about once every couple of weeks and it is always fun to see where my money is invested and how it is growing. One of the best things about Acorns is how great their experience is on both mobile and desktop. Unlike some other clunky financial applications, it is designed with a very simple, easy to use interface that lets you quickly find the information you are looking for without having to try too hard.
My account has grown by $50-$100 each month, mostly based on deposits made to the account. The value of my account has increased by $19.09, which is not a bad return. Obviously, this is very heavily dependent on the fluctuations of the market and can go up or down at any time. The thing that I like about having Acorns handle this for me is that I don’t have to be responsible for picking stocks, monitoring the performance of those stocks and feeling like I need to stay up on the market. I just trust that over time, the stock market is a good place for my money and that this application has as good a chance as any at growing my money.
I don’t plan on shifting any large sums of my savings to Acorns, but I will continue to leave the account on and running. I estimate that I will continue to add about $50-$100 each month to the account, so at some point, Acorns will be holding a decent chunk of my overall investment portfolio. By using multiple automated savings applications, I am able to constantly save without seeing a dramatic difference in my checking account, but always building wealth with very little of my time invested.
How to get started with Acorns
The setup process is very simple. You can go to this link and get a $5 bonus for signing up. The process takes about 5-10 minutes from start to finish. You will need your personal online banking login information and you may need to provide a routing number and account number for your checking account. You will also need to provide some personal information like your SSN, home address, first and last name so they can verify your identity for regulatory purposes. There is no minimum deposit and you will start building up your account right away.
If you feel like Acorns is the right move to help you automate your savings, go give it a try. Let me know how it goes by leaving a comment below.