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While many people have an interest in investing, the subject can be overwhelming or intimidating for someone with no experience. Someone who has limited investing experience may not know where to begin or they may feel like saving/investing a small amount won’t be enough to make a difference.
Companies like Acorns have made it easy for anyone and everyone to invest in the stock market with a customized investment portfolio. This modern investing app even offers cashback rewards opportunities, multiple account types, and unique savings strategies to make the process easier.
But is acorns really worth it? Or are there better alternatives to investing in the stock market?
In this Acorns review, we’ll cover a basic overview of how Acorns works, the associated fees, minimum balances, details of its features and benefits, and who the app is best suited for.
What is Acorns and How Does it Work?
Acorns is a modern investing app whose mission is to “look after the financial best interests of the up-and-coming, beginning with the empowering step of micro-investing.” In other words, they seek to better your financial future starting with micro-investing. Micro investing is simply investing in the stock market with small amounts of money, usually between $1 – $10 at a time.
Acorns is unique in that it allows investors to link their bank account to their Acorns account, and automatically “rounds up” their daily purchases to the next whole dollar and invest the spare change into their investment account.
The investing app makes it easy for users to open up an account, answer a few investing questions, and get a premade investment portfolio based on their responses to these basic questions. This concept is also known as a robo-advisor, or an investing app that uses a proprietary algorithm built by tech gurus with the expertise of professional investors to build a customized portfolio for you.
Furthermore, Acorns’ platform provides additional opportunities to earn cashback that is deposited into your investment account automatically, additional options for a checking account, and even free content on how to become a better investor are offered. In short, Acorns is a robo-advisor that simplifies the process of investing in the stock market.
→ Related reading: 10 Legit Ways to Get Free Stocks
New users have multiple options to choose from when opening an account. The fees range from $1 per month up to $5 per month, depending on the package you choose. The pricing packages are as follows:
- Lite – $1 per month: This package includes just your basic acorns individual investment account. It gives you access to all the investment account benefits such as “Round-Ups,” “Found-Money,” and access to educational content.
- Personal – $3 per month: This package includes everything in the Lite package, plus an Acorns Later account which is an IRA investment account, along with an Acorns Spend account, which is their basic checking account with additional “Round Up” benefits.
- Family – $5 per month: Includes everything in the Personal package plus an Acorns Early account which is a custodial investment account for kids, managed by you.
Since Acorns is aimed at helping people invest with little money (micro-investing), they have zero account minimums to maintain nor any opening balance account minimums. If you want to start with just $5, you can. If you wish to deposit $1,000, you can do that as well.
Available Account Types
Acorns algorithm will recommend which accounts will most likely benefit your financial situation based on your account opening questions. Among the available investment accounts Acorns offers are:
- Individual Investment Accounts (aka Brokerage Accounts)
- Individual Retirement Accounts (IRA) – Acorns Later will recommend either a Traditional IRA, Roth IRA, or SEP IRA based on your financial goals.
- Custodial Investing Accounts – The Acorns Early accounts are considered Uniform Transfer to Minors Act (UTMA) or Uniform Gift to Minors Act (UGMA) accounts. These are simply accounts that can be opened for children to both transfer and gift money to with additional tax benefits.
Acorns Features & Benefits
With so many investment companies available today (such as Stash, Robinhood, or M1 Finance), why would you decide to invest your money with Acorns? Here is a list of all the features Acorns offers, and how they are beneficial to investors.
Acorns was one of the first, if not the first finance app to allow users to round up their daily purchases to the next dollar and invest your spare change. In fact, it was on this basis that the company was built. By investing your spare change, you are planting “acorns” now to grow large oak trees in the future through investing.
Round-Ups are invested only in increments of $5.00. If you have an Acorns Spend account, they happen in real-time and the spare change is invested at the soonest possible time.
The Round-Ups option also lets you turn on Round-Ups multipliers. You can set a multiplier to be two times, three times or even ten times your spare change. For example, if you purchase a drink at a local grocery store for $2.50, then your normal round up would be $0.50. If you turned on the 2x multiplier, it’d be $1.00. If you turned on the 3x multiplier, your round up would be $1.50 and the 10x multiplier would make your round-up be $5.00
Round-Ups can be set to happen on automatic or you can go through and individually select the transactions you wish to be rounded up yourself.
Round-Ups aren’t the only way you can build up your investment balances. Like any traditional brokerage investment account, you can make one-time deposits and also set up recurring deposits to be invested automatically.
Found Money is Acorns’ title for their cashback program. This is exactly the same thing as general cashback programs like Ibotta or Drop for example. When you make purchases at the partnered retailers with Acorns, you get cashback.
Where Acorns Found Money differs from general cashback programs is that the cash you earn is automatically invested into your Acorns investment account.
Found Money deals can be anything from getting 5% of your purchase invested when shopping with Nike to getting $5 invested for opening a new GrubHub account. Are you a small business in need of user-friendly accounting software? With Acorns Found Money you can get $20 invested into your account when setting up an Intuit QuickBooks account. There are hundreds of offers with Acorns Found Money program.
NOTE: Keep in mind these offers mentioned above as examples are offers as of this writing and may change over time.
Acorns Spend is a basic checking account that comes with a tungsten metal debit card. This makes it easier for users to manage their money having both a checking and investment account in one place.
If you have an Acorns Spend account, your Round-Ups happen in real-time, and you can even get Found Money opportunities at in-store purchases when using the debit card.
Acorns Early is the custodial minor accounts for kids to start saving money for their future. When you open an Acorns Early account, you are purchasing the Family package which comes with the full “financial wellness system” as Acorns calls it, which means you are also getting their full suite of products.
The Acorns Early account cannot be opened individually and is only available via the Family package. You can open multiple Acorns Early accounts without any additional cost than that of the Family package.
View Potential Growth
Within each of your Acorns accounts, you have the option to view your hypothetical future given your current savings rate. You can view how much money you’d have at age 70 including if you’re using Round-Ups and recurring investments, or how much you’d have if you turn both those features off and let your balance grow.
Grow is Acorns money blog and educational center that teaches you anything from saving, investing, earning, spending, and borrowing.
You can sign up for recurring newsletters to send you educational content regularly sent to your email. For those wanting to learn more about finance and investing, Grow is a great resource to keep in your toolbox.
Where Acorns Falls Short
Of course, every company has its downfalls that can make or break your decision to use their product or not. While Acorns offers a great solution for new investors who want to have a customized portfolio made for them and invest automatically, its downsides may outweigh the benefits for many.
Limited Investment Options
When setting up your account, you will be recommended one of just five investment portfolios. They are:
- Moderately Conservative
- Moderately Aggressive
Each of these investment portfolios is made up entirely of Exchange Traded Funds (ETFs). The ETFs are split between stock ETFs and bond ETFs.
But what if you want a wider selection of investment options? Perhaps you’d like to pick the different funds yourself? Or maybe you’d like to invest in individual companies that you love?
If this is you, then Acorns will be a frustrating option for you with extremely limited investment options to choose from. Other options like Robinhood and Webull provide a much wider range of investment options.
High Fees for Smaller Accounts
On the one hand, to most people reading this it may seem that $1 per month is very doable. However, as compared to other investment accounts it can be a pretty steep price if you have a low balance in the account. Most brokerages today have zero fees to maintain your account or only charge a fraction of a percent of your portfolio balance per year. For example, a managed investment portfolio like Acorns may have a fee of 0.25% of the balance annually.
In order to have that same price mathematically with Acorns, you need at least $4,800 in your investment account. With any balance below that, you’re paying fees that are higher than the traditional 0.25% managed investment fee.
If you have an Acorns Personal package (Acorns Invest, Acorns Spend and Acorns Later account) which is $3 per month, you’d need at least $14,400 to achieve a 0.25% fee. If you have an Acorns Family package (Acorns Invest, Acorns Later, Acorns Spend and Acorns Early accounts), you’d need at least$24,000 within your accounts to achieve a 0.25% fee mathematically.
In other words, in order to get a better fee structure than most of Acorns’ competitors, you need to have a balance of at least $4,800 for Acorns Lite, $14,400 account balance for Acorns Personal, and at least $24,000 account balance for Acorns Family.
The higher your account balance is above those thresholds, the better your fee structure becomes until you reach $1 million. After achieving the $1 million milestone, Acorns charges just $100 per $1 million, or 0.01% which is very favorable.
The contrary is also true. If your account balance is only $500, then you’re being charged 2.4% per year on your account balance if you’re paying $1 per month. If you’re paying $3 per month, then your annual fee for having $500 with Acorns equates to 7.2%, and if you have the Family package your annual fee for having $500 with Acorns equates to 12%.
For those with smaller balances, an alternative like M1 Finance might be a better choice
Very Limited Research Tools
The only real tool available on Acorns is their “potential growth” chart that allows you to see how your portfolio will hypothetically grow. However, they have no detailed market news, limited available details on the ETFs being invested in, and no info on researching individual companies and other investment options.
Just a diversified portfolio made up of ETFs, a potential growth chart and some educational content are all that is available.
Who Acorns Is Best Suited For?
Wondering if Acorns is right for you? They have a very niche audience of investors that will benefit from their product. That market most likely consists of people with the following needs or characteristics:
- You want to start investing but have a limited budget to start
- You have little time to commit to managing your investment portfolio
- You have at least $4,800 to invest, otherwise you’re paying a higher fee than necessary
- You’re a beginner investor who wants to learn the basics of investing with no intentions to become an active investor managing your own portfolio
- You want a basic “all in one” option to invest, spend, save for retirement, save for your kids, and learn the basics of the stock market
Otherwise, if you are looking for something outside of these parameters, you’d be smart to consider other options. For modern investment apps that have more options for investing, consider looking at Webull, Robinhood, or M1 Finance.
Acorns is a unique app that has some great features, like the ability to invest automatically by rounding up your purchases. However, it comes with a price. Due to the pricing structure that uses a flat monthly fee, users will small balances will pay fees that are much higher than necessary. For that reason, people who want automated investing may be better off with an option like M1 Finance, even though it does not offer round-ups and some of the other functionality of Acorns. If you’re able to maintain a higher balance, Acorns could be a great choice.
You may also be interested in learning more about the investing platforms in the table below.
Acorns Investing App
Acorns is an automatic savings and micro investing app that offers compelling features like automated round ups to help users save and invest more. However, limited investment options and high fees for accounts with small balances may lead users to look elsewhere.