Like a virtual piggy bank, Acorns is an increasingly popular way to save your change from purchases and watch it accumulate.

The micro-investing app has more than 2 million users as its been attracting a growing number of millennials. The app can automatically round up the amount of your purchases to the nearest dollar, then invest that difference into a robo-managed portfolio.

Acorns is free for college students with a valid .edu email address, but otherwise the service costs $1 per month. When the account balance reaches $5,000, Acorns takes a 0.25 percent fee each year. Those charges are called the “management fee,” or a charge for not only sweeping your “loose change” into one account, but also helping it grow.

Acorns is ideal for college students because of the free cost. This younger demographic may not have income yet and so may not be investing in accounts with tax advantages like IRAs. Students who leverage Acorns for four years may need a chunk of funds at their graduation to help transition to their next phase in life. (See also: Acorns: The Perfect Investing Tool for Millennials.)

This automated savings service also benefits those who struggle with saving. Consumers do not have to make the decision to save their change from their purchases with this program, which makes savings more likely. The concept is similar to 401(k)​ contributions that employers take from employee’s paychecks – a process that aims to be easy and mindless, and therefore successful.

How Acorns Works

Users have the option of having each purchase rounded up to the nearest $1 and swept into an investment portfolio, or choosing the transfers on a case-by-case basis. You can also choose to invest lump sums from your checking account and set transfers for monthly, weekly or daily basis. The minimum transfer is $5.

Acorns has five pre-built portfolios of low-cost exchange traded funds that, for example, mirror the Dow Jones or S&P 500. They range from an aggressive portfolio that emphasizes small companies to a conservative portfolio that prioritizes bonds. Users select the amount of risk they want to assume, and Acorns assigns a portfolio. You will be able to see exactly how much of your money is invested in various assets like bonds, stocks and real estate. You will also see your exact investment in each stock in which your money is invested, down to the fraction of a cent. (See also: How Acorns Works and Makes Money.)

Acorns is indeed useful tool to help with forced savings and investment. But investors who do not qualify for the free service should be aware that when they have a small balance, the $1 monthly fee could actually be a significant percentage for robo-managing a portfolio. Those with a larger balance of more than $5,000 will incur the 0.25 percent annual fee, which is on par with other robo-managed accounts such as Betterment or Wealthfront. (See also: Which Robo-Advisors are Growing the Fastest?)

Another drawback to the Acorns system of investing is that the funds do not receive the same tax benefit of money invested in retirement accounts, like a traditional or Roth IRA or an employee-sponsored 401(k). So individuals who have not met their minimum retirement contribution yet would fare better in the long-term by investing in those tax-advantaged accounts before leveraging Acorns’ portfolios. 

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