By: Vania Ahmad
Have you ever considered investing your spare change?
Acorns is an app that allows users to automatically make investments by rounding up spare change from credit or debit card purchases. For example, if you buy a latte for $3.75, 25 cents will be withdrawn from your bank account or charged to your credit card. Once the roundups reach $5, the money is invested in a personalized portfolio. You also have the options to invest lump sums and set daily, weekly, or monthly recurring investments.
There are five different options for Acorns portfolios with varying risk levels, which were developed using Nobel Prize winner Dr. Harry Markowitz’s Modern Portfolio Theory. All of the portfolios are diversified across six asset classes: large company stocks, small company stocks, emerging market stocks, government bonds, corporate bonds and real estate stocks. The “conservative” portfolio invests heavily in government bonds while the “aggressive” portfolio invests more in real estate stocks. There are also moderately conservative, moderate and moderately aggressive portfolios. After asking a few simple questions, Acorns recommends a portfolio for users based on their current financial situations and investment goals.
Acorns charges a fee of $1 per month for accounts under $5,000, and accounts over $5,000 are charged a .25% annual fee. There are no fees or penalties for deposits and withdrawals, nor is there a minimum balance requirement. Accounts with a $0 balance are not charged any fees.
Apps such as Acorns encourage young people to start investing. Results from a Bankrate survey show that only 26% of adults under the age of 30 invest in stocks. When Bankrate asked “stock avoiders” why they don’t invest, the most popular response was that they don’t have enough money. Another reason why so few millennials invest is because they don’t know where to start. The idea of making investments can be intimidating, but apps like Acorns make investing more affordable and accessible. Users can invest a few dollars (or even a few cents) at a time. Instead of having to go through a broker and paying commission, they can make investments with a few swipes on their phones.
Acorns was founded in 2012 by Jeff and Walter Cruttenden, a father and son duo. According to CNN Money, the Acorns app has about 650,000 users, most of which are millennials. They have saved a combined $25 million since the app launched in August 2014.
It’s surprising how much spare change can add up to. What are you doing with yours?
Screenshots courtesy of Acorns media resources
Update 7/8/15: Acorns is now free for students! Students who sign up for an Acorns account with their .edu emails no longer have to pay monthly fees.