An Acorns Review including pros, cons and why I use it over the free investing apps
Spare change savings tools are all the rage and that means lots of options…almost too many options. I've used Stash, Digit and just recently started using Acorns.
Most of these savings apps charge a monthly fee around $1 to save and invest your money. Considering I've also used free investing apps like Robinhood and M1 Finance, why would I consider paying another app for the same thing?
Because there's a lot to like about the spare change apps and some features that make saving and investing automatic. That might just make them worth the $1 a month fee for you.
I'll review my experience with Acorns, how the app works and how to get the most of it. I'll reveal the pros and cons as well as which types of investors should use the app.
Acorns App Pros
- Automatic savings tool from money you won't even miss
- Cash back program to save even more
- Stress-free investing done for you
Acorns App Cons
- Fee can be a larger percentage on small accounts
- Fewer investment choices
How Does Acorns Work?
Acorns is a spare-change investing app that works any time you buy something. The app has combined the old school savings apps with robo-advisors to give you something unique and meet your financial goals.
After you open an account on Acorns, you'll link up your credit cards and debit cards. Any time you make a purchase on those linked cards, the app will round up the amount you pay and invest the change in your account.
For example, if your grocery bill comes to $47.23 then Acorns will round that up on your debit card to $48 and put the difference of $0.77 into your investment account.
That would be a great feature in itself and many of the older spare change apps did just that. It makes saving money automatic and easy because you don't miss the spare change from your purchases.
Acorns goes a step further though, combining a savings tool with an investing platform. Acorns uses unique robo-advisor technology to put your money in one of five different portfolios.
After answering a few basic questions like age and investing goals, Acorns shows you a portfolio of exchange traded funds (ETFs) customized for your investing needs. These are all combinations of Vanguard and iShares funds so the expense ratio is ridiculously low, around 0.1% on average. The funds invest across all the major asset classes including stocks, bonds and real estate.
So Acorns takes the money you save from your spare change and invests it automatically into your investment portfolio. The app keeps all your money invested, putting new money and reinvesting dividends into the account.
You never pay a commission for Acorns investing. The app charges a monthly fee of $1 which I'll talk about next but it will automatically invest your money every day at no cost to you.
Another huge benefit with Acorns is the cash reward program it's set up with over 300 stores. Partners like Nike, Walmart and Apple all give cash-back bonuses any time you buy something with one of your Acorns-linked cards. Just use your debit or credit card at one of these partners and you'll get up to 5% cash back invested in your Acorns account.
I recently compared the Acorns app against some of the free investing platforms like Robinhood and M1 Finance in a video review on YouTube. While I use both of these free apps to invest, I also use Acorns to make saving more money automatic and get that do-it-for-me robo-advisor feature.
For anyone that wants a stress-free way to save and invest, it's hard to beat the Acorns app. I'll go over some of the downsides to the app and compare it against another spare change savings tool but I've used Acorns for more than a year and have never looked back.
It's free to open an Acorns account and you never pay a commission when the app invests your spare change. The only fee on Acorns is a $1 monthly charge on taxable accounts or a $2 monthly charge for retirement accounts.
That $1 a month works out to about a 0.25% expense fee on accounts of $5,000 which is similar to other robo-investing platforms like Wealthfront and Betterment.
That's why I usually refer to Acorns as a free spare change investing tool with a premium robo-advisor feature. Basically, you're getting the spare change app free when you invest through the portfolios.
That monthly fee on Acorns can be great or not-so-great depending on how much you have in your account, and this is the big drawback to the app.
For extremely small accounts under $1,000 – that $1 a month charge is a big chunk of your money compared to a free investing site like Robinhood. Paying $12 a year on an account of $1,000 means you're paying a 1.2% fee which is comparable to mutual funds but way more than most ETFs.
Honestly though, and I understand that everyone needs to start somewhere, but if your retirement account isn't over $1,000…you need to be adding to it. It's ok to start with a little saved but everyone needs at least a few thousand saved for emergencies and socked away for their golden years.
Once you get over that $5,000 account value, that monthly charge keeps falling as a percentage and people with a $10,000 account are only paying 0.12% annually for a great robo-advisor service.
As a special offer, college students can sign up to Acorns and get up to four years of free service with no monthly fees!
Acorns Customer Service
Acorns customer support is only available through email but I've always gotten a response within 24 hours. I've read other Acorns reviews where it took as long as 48 hours to get a response but this seems to be the exception rather than the rule.
Customer service responses have always answered my questions completely and it's clear they read through your entire email. This is a refreshing change compared to other platforms I've tried where support just skimmed my email and linked to help articles on the website.
I would rather there be some chat or call support but email support has always worked well so no real complaints.
Is Acorns a Good Investment?
Is Acorns a good investment and will you make money using the app are two very different questions.
Whether your investments increase in value is totally dependent on the Vanguard and iShares funds you have in your portfolio. This is completely out of Acorns' hands and really depends on the stock market.
Over the long-term, you will make money on your investments. The five portfolios used by Acorns are well-diversified across all three major asset classes including stocks, bonds and real estate.
Now whether the Acorns app itself is a good investment, paying that $1 monthly fee for the robo-advisor service, is another question…but here I would say the answer is yes as well.
For just $1 a month, you get an automatic savings tool that makes saving money easy. You get completely stress-free investing management designed around your goals and everything done for you. I was trying to think of something else that costs $1 to compare it against…but how many things only cost a dollar anymore?
Is Acorns Federally Insured?
Your investments in the Acorns app are managed by an in-house broker and advisor, both registered with the Securities & Exchange Commission (SEC). Acorns Securities is a member of FINRA and the SIPC which is the main regulator for investment brokers and the Securities Investor Protection Corporation.
With that SIPC membership and regulation, your investments are protected up to an account value of $500,000 in the event that Acorns fails.
Understand this doesn't mean your investments themselves can't lose value. That's up to the funds themselves and how well the investments do in the market but your money in the portfolio is guaranteed from an Acorns bankruptcy or anything like that.
Acorns vs Stash App
Stash is very similar to Acorns in most ways but there are enough differences that I like Acorns better.
Stash is also a savings tool in that you can invest very small amounts, as little as $5, but it doesn't have the spare change feature included in Acorns. Stash charges a $1 fee for accounts under $5,000 and 0.25% for accounts over that amount so you're kind of stuck with a higher expense even on those larger accounts.
Stash does offer more investing options including individual stocks, than you'll get with Acorns but the app doesn't do any of the investing for you. Stash only recommends different investing ideas, you still have to manage the investments yourself.
I prefer Acorns for several reasons. For larger accounts, you can get that monthly fee down to less than 0.12% of your portfolio value which is about the best you'll find anywhere. You also get that do-it-for-me approach with the robo-advisor and don't have to worry about managing your own investments.
Acorns Review Summary
The Acorns app is perfect if you have trouble saving as much as you like or just want that hands-off robo investing strategy. You'll still probably need to invest a little extra on the side to meet your financial goals, the spare change savings adds up but can only go so far.
There are a few things that could be improved, maybe lowering the initial monthly fees for smaller accounts, but overall this is a great way to save and invest.
There's a lot to like about spare change savings tools like Acorns and I love how it combines automatic savings with a stress-free way to invest. Acorns is perfect for anyone that has trouble saving or just wants that hands-free investing strategy with a robo-advisor. I've used the app for over a year and never have to worry about saving enough money or investing.