The Acorns app lets beginning savers hoard money like squirrels: caching the small change from everyday purchases and turning it into investable assets. There are three levels of service: Core, Later and a checking account called Spend. Investing in a Core account lets you put a minimum of $5 to work by purchasing a set of diversified exchange-traded funds (ETFs). Core account: $1 per month
Launched in 2014 by a father-and-son team, the basic service, Acorns Core, encourages you to take the change left over from small purchases and drop it into your portfolio. For $1 per month, Acorns Core automatically transfers money to your Acorns account, based on your preferences. For example, if you use your debit card to buy a cup of coffee for $2.50, you can tell Acorns to round it up to $3 and drop that extra 50 cents into your investment account. You can also attach a credit card or a PayPal account to your Acorns portfolio.
Acorns Core has partnered with several hundred brands, with their Found Money feature, which will credit your account when you make a purchase from a credit or debit card linked to your Acorns account. There are some limitations to these promotions, and the funds can take up to 90 days to be deposited, but it’s another way to generate some investable assets. Brands who have partnered with Acorns in the Found Money feature include Nike, AirBNB Apple, Expedia, Sephora and Stitch Fix.
Opening an account is relatively easy, although new customers are required to provide a lot of sensitive financial data before the specific benefits are clearly spelled out. Ideally new customers would receive more information about Acorns before being asked to provide their email address and define a password, then provide information about your bank accounts, debit cards and credit cards.
The portfolio that Acorns sets up for you depends on your age and your stated goals, and is chosen from five pre-fabricated portfolios that range from conservative to aggressive. The ETFs included in these portfolios have low management fees, and most are provided by Vanguard and Blackrock.
Acorns also charges monthly account fees: a Core account costs $1 per month, a Later account costs $2 per month, which includes a Core account, and a Spend account costs $3 per month, which includes both Core and Later accounts.
Mobile apps give you a complete view of your account, and of the forecasted growth.
The Core account also includes access to educational material that can help the young investor get – and stay – on track. A corporate publication called Grow Magazine encourages thrift, paying down expensive debt, and saving for the future. College students who can verify their status as enrolled students can use Acorns Core for no monthly fee.
In early 2018, Acorns added a new service, Acorns Later, which lets you open an individual retirement account (IRA). You have to have an Acorns Core account to access Later, and the fee is an additional $1 per month. You’re encouraged to set up automatic contributions, and the firm offers help rolling an existing IRA or 401(k) account into a Later account. The retirement accounts developed for the Later feature are based on the customer’s age and number of years left in the work force. As time goes by, the investment mix becomes more and more conservative.
An additional $1 per month gets you an Acorns Spend checking account, which is linked to your investing accounts. You must have both Acorns Core and Later to qualify for Spend. The checking account reimburses ATM fees from making third-party cash withdrawals since their bank does not have a physical presence. Plus you won’t be charged any overdraft fees as long as you have enough in your investment accounts to cover the shortage.