Acorns Review; Investing Your Spare Change

I spent the last 3 months using Acorns to see how it worked and if it was worth the money (it's "free" but they charge you fees, I'll cover that later).

I had read a couple reviews online but I wanted a first hand experience from someone who had used the app themselves. Since I couldn't find that, I decided to do it myself.

Bottom Line - 4.5/5 Stars

Pros

  • Easy to use
  • No minimum to invest
  • Runs on 100% autopilot

Cons

  • $1 monthly fee is high for low balance accounts
  • Can't choose specific investments
  • Potential for surprise tax bill

Overall

Acorns is super easy to use and runs on auto pilot.

If you're looking for an easy way to save more for retirement, Acorns is perfect.

What Is Acorns?

Acorns is a mobile app that rounds up your everyday purchases to the nearest dollar and automatically invests that money in the stock market.

The idea is pretty simple. Instead of forcing you to actively think about setting money aside to invest, Acorns does it automatically so you don't notice it and the more you spend, the more you invest!

What Does the App Look Like?

The Acorns app is pretty slick. It's simple to navigate and shows you the performance of your account in a simple, easy to read format.

Here's a real view of what each of the main screens in Acorns look like. These are the actual snapshots from my account after using it for a few months.

The central screen is your current account status. This screen shows you how much you currently have saved and what your all-time market gain/loss is sitting at.

If you swipe to the left it will take into your past history. This tab will show your recent investments which includes rounded up purchases and "Found Money" which we'll get into later.

The round-up investments are made when you use your linked credit card. Each purchase gets rounded up to the nearest dollar and once you've accumulated $5 of rounded up change, Acorns deposits that into your account.

If you swipe to the right from the central screen you'll see your future projections. Acorns bases this on your contributions and expectations for future growth. They also give you the option to increase your monthly deposit that is in addition to your round ups. Then they give you a projection for how much more money you could save if you made this change.

How Does Acorns Work?

The way Acorns works is pretty straight forward. You can contribute in two different ways.

The first way is how almost every investing app/company works. You define a set amount you'd like to contribute each month and that gets pulled out of your bank account and automatically deposited.

The second way is the unique proposition of Acorns. Every time you make a purchase they'll round up your purchase to the nearest dollar and invest that money for you. There are also some other options you can choose like rounding up to the nearest $2, nearest $5, etc. You can also choose a multiplier so it would round up to the nearest dollar then multiply by 2, 5, 10, etc.

I set my account up to round up my purchases to the nearest dollar and left it at the default setting; no multiplying or increasing. 

But mechanically the way this works is a little different. I was hoping that when I bought something for $0.50 on my credit card, it would just add $0.50 to that purchase and my credit card would get charged $1.00. But that's not how it works.

Take the example above of buying something for $.50. Acorns will not change your credit card purchase amount. Instead it takes the round up amount of $0.50 and sets it aside. Once your round ups total $5.00, then they pull that money from your bank account and deposit it into your Acorns investment account.

So when you set up your account you have to define 2 things. 

1 - What card will be getting rounded up?

2 - Where will these round ups be deducted from?

Since Acorns can't deduct money from your credit card you have to set up a bank account to actually make the contributions. 

Overall this isn't a huge deal but I wish I had understood exactly how it worked before signing up (and now you do!).

Acorns Found Money Feature

Another cool thing about Acorns is the "Found Money" feature. This is an additional bonus that they contribute to your account when you shop with one of their featured vendors.

Each vendor has it's own offer so the amount you can earn depends on where you shop.

For instance, every time I shop at Sam's Club, Acorns gives me $1.

If I bought a mattress from Casper, they'd give me $150. 

I haven't found any offers that were compelling enough to make me buy something from that company just to get the 'Found Money'. But since I normally get groceries from Sam's Club every week, the extra $1 is a nice little bonus. 

Here's an sample of what the Found Money offerings look like:

Is Acorns Safe?

Acorns isn't a bank so they aren't FDIC insured. But they are covered by the SIPC which stands for Securities Investment Protection Corporation.

This is valid up to $500,000 so if you're going to be rounding up more than a half million in purchases...well you probably have a spending problem that should be addressed before you worry about Acorns failing.

How Much Are The Fees?

Acorns doesn't charge any transaction fees but they do charge a monthly account maintenance fee.

  • For the basic investment account, this fee is $1 per month.
  • If you want an IRA it costs $2 per month.
  • If you want the IRA and a debit card that's linked up to it, it costs $3 per month.

There's no reason to pay extra for a debit card or IRA so for the purposes of this review I'm just going to talk about the $1 per month fee and whether or not it's worth it.

A lot of people complain about the $1 fee because on a percentage basis, it can really add up.

If you don't make a lot of purchases and only end up rounding up $100 of savings in a year, paying $12 in fees is pretty outrageous. Paying a 12% commission to invest in an index fund is nuts and you shouldn't do that.

Once you start to build up more money, the fee doesn't hurt as much. 

Amount invested

yearly fee

fee as a percentage

$100

$12

12%

$1,000

$12

1.2%

$5,000

$12

0.24%

$10,000

$12

0.12%

So are the fees worth it?

Personally I think they are. My current setup is rounding up all my purchases then contributing $50 per month.

Based on my current history this means I'm contributing about $100 per month or $1,200 per year.

  • So my fees in the first year will be around 1% ($12/$1,200).
  • The fees in my second year will be about 0.5% ($12/$2,400).
  • The 3rd year will be 0.3% ($12/$3,600), etc...

Of course when you compare these apples to apples with Vanguard index fund fees, they look crazy high. Of course the value proposition from Acorns is that these are just round ups on your current purchases so it doesn't feel like you're taking money directly out of your account.

But of course you are. Because of what I described earlier where you have to setup both a credit card and a bank account, Acorns basically boils down to a fixed deposit amount. Vanguard lets you do the exact same thing and doesn't charge you any fee.

So who should use Acorns when Vanguard is free?

If you've ever had trouble saving money up to invest, Acorns is a good solution. I max out my 401(k) but I've never set up an after tax investment account. It always seemed like it wouldn't fit in my budget or it was too "scary" to see a $100 withdrawal every X weeks or X months.

Acorns help mitigate that by smoothing out the withdrawals and making them smaller so you don't really miss the money. Every time your round ups hit $5, Acorns just pulls the money out of your bank account.

For me this happens every couple of days so it feels a lot easier to save $1-$2 per day than it does to have $50 each month being withdrawn.

I know it's the same. I know the math is equal and this is just a stupid thing with my brain. But I know this is something that happens to a LOT of people. 

The bottom line is for me, paying Acorns $1 per month is worth it. Their rounding method helps me get over the mental hurdle of pulling that money out of my bank account which means I can save more.

At the end of a year I'll have saved over $1,000 in my after tax investment account and without Acorns, it's something I simply wouldn't have done. 

So if someone told you that you could pay $12 per year and save $1,000 without noticing, would you take them up on it? I would (and I am!).

How Does Acorns Make Money?

Acorns makes money in two ways.

The first way is the method I described above where they charge a $1-$3 fee per month for every active account. They have somewhere between 500k-1 million members so they're pulling in around $5-$10 million per year in revenue.

The other way they "make" money is by raising investment rounds from venture capitalists. According to Crunchbase, Acorns has raised $152 million in private investor money. This is what they used to hire their team, build the app, and market it.

Obviously they can't operate at a loss and continue to raise money forever so their long term goal is probably to have enough customers so that the monthly fee covers their ongoing costs and allows them to make a profit.

Acorns Application Process

Acorns is open to the public so anyone can sign up. The application process is straight forward and similar to other brokerages. You fill out your personal information and your investment goals/experience.

Based on your risk tolerance and age they will come up with a recommended investment portfolio. If you're younger and more risk tolerant, you'll have a higher percentage of risky investments.

Older/more conservative people will have a less risky investment profile.

We'll dive into the investment options in the next section to show you exactly what you're money will be going into.

What Stocks Does Acorns Invest In?

Acorns allocates your investment into 6 different ETFs (exchange traded funds). These ETFs are collections of a wide variety of individual stocks/bonds so they're essentially mini-index funds. The ETFs are:

  • Corporate Bonds - iShares Inv Grd Corp Bond ETF ($LQD)
  • Government Bonds - Treasury Bond ETF ($SHY)
  • Large Company Stocks - Vanguard S&P 500 ($VOO)
  • International Large Company Stocks - Vanguard FTSE Developed Markets ($VEA)
  • Emerging Market Stocks - Vanguard Emerging Markets ($VWO)
  • Small Company Stocks - Vanguard Small Cap ($VB)
  • Real Estate Stocks - Vanguard REIT Index ($VNQ)

And there are 5 different risk levels:

  • Conservative
  • Moderately Conservative
  • Moderate
  • Moderately Aggressive
  • Aggressive

And here's the ETF allocation for each of these risk tolerances:

Conservative

Mod. Conservative

Moderate

Mod. Aggressive

Aggressive

Corp Bonds.

40%

30%

20%

10%

0%

Gov. Bonds.

40%

30%

20%

10%

0%

Int'l Large

4%

8%

12%

16%

20%

Emerging Markets

0%

0%

3%

4%

10%

Small U.S. Stocks

2%

4%

10%

14%

20%

Large U.S. Stocks

12%

24%

29%

38%

40%

Real Estate

2%

4%

6%

8%

10%

It's easy to switch your investment allocations if you want. You can just go into the settings and click on the allocation you want and choose "Change Portfolio".

Acorns Alternatives

If you're thinking about using Acorns, you're probably just looking for an easy, convenient way to invest your money. If that's your goal then there are lot of alternatives out there. I'm going to look at 7 different investing apps out there and do a quick comparison between each one and Acorns.

Stash

Stash is very similar to Acorns except it works with scheduled withdrawals instead of rounding up purchases.

They charge the same fees per month as Acorns if your balance is under $5,000. After you hit $5,000 they charge a 0.25% fee.

They do offer a wider selection of ETFs so you can fine tune your asset allocation. The downside to this is that the expense ratio on these ETFs varies between 0.05% all the way up to 1.0%.

Acorns uses very low fee ETFs that are mostly from Vanguard so you'll save a little bit of money compared to Stash.

M1 Finance

M1 Finance works by scheduling regularly occuring or one time deposits to your investment account.

The upside of M1 is that you can specifically choose what stocks or funds you want to invest in. You can also purchase fractional shares.

This is currently my favorite investment app because I want to own shares of companies like Tesla and Amazon but it's too hard to create a diversified portfolio when their shares cost hundreds or thousands of dollars. Being able to buy $100 of Amazon stock every time I get paid is a great way for me to build a position in a company I believe in while still being diversified.

I wouldn't really consider M1 a direct competitor to Acorns. Acorns is focused more on the "set it and forget it" crowd that wants to set their index investing on autopilot. M1 seems to focus more on the individual stock crowd who wants to pick and choose exactly how their money is allocated.

Robinhood

Robinhood is another one of my favorite investing apps. Robinhood basically acts as a full on brokerage allowing you to trade stocks, options and even cryptocurrency.

They don't offer anything that rounds up purchases; just one time deposits from your bank account.

If you're looking for a brokerage account where you can do more active trading or if you want to dabble in options/crypto trading then this is the app for you.

You can also use Robinhood in a hands off way. After selling my Amazon FBA side hustle, I took $10k of the profit and put it in Robinhood. I split the $10k up between a handful of different high yield ETFs that have ~5% dividends which is much higher than I get from my PNC savings account.

Betterment

Betterment is one of the most well known "robo advisors". These investment companies use computer programs to perform tax loss harvesting and balance your portfolio.

They also have very low fees, just 0.25% of your balance. Similar to Acorns, they have a specific list of ETFs that you can invest in based on your risk tolerance.

Betterment is probably the most similar investing app to Acorns but it relies on normal deposits instead of rounding up your purchases. They do require a $500 initial deposit so if you're below that threshold it would be easier to get started with Acorns or Robinhood.

Wealthfront

Wealthfront is another robo advisor, similar to Betterment. This review on Nerdwallet has this handy chart comparing the two options. As you can see they're pretty similar, the only differences being some very specific offerings between the two.

Clink

Clink is very similar to Acorns. Instead of rounding up purchases, you set a defined amount you want to contribute. This is deposited into your investment account and split up between different ETFs. The ETFs are not explicitly stated but they're based on your risk tolerance and time horizon.

Currently Clink doesn't charge any fees but this probably isn't sustainable. They've announced they'll soon be moving to the same fee setup as Acorns, $1 per month.

Due to the lack of clarity around how your money is invested I wouldn't use this app over Acorns.

Wisebanyan

Wisebanyan is similar to Wealthfront and Betterment but completely free for the basic features. It costs extra if you want things like tax loss harvesting or personal investment advice.

I wouldn't consider Wisebanyan a competitor to Acorns at all. It's more in line with the other robo advisors.

Acorns Debit Card

Acorns Spend is their recently released debit card. As of the writing of this article (Nov. 2018) the debit card is sold out so you have to join the waiting list.

The Acorns debit card offers instant round ups on your purchases which addresses one of my complaints earlier about the credit card/bank account set up.

Since this card costs an extra $1 per month and doesn't offer any cash back, I don't see any reason to use it. My current credit card offers 2% cash back on every purchase and still works with Acorns round up so there's no reason for me to switch.

If you really want the instant round ups then this might be a good solution but I'd have a hard time giving up my cash back and paying an additional $12 per year to use this card.

Acorns Customer Service

I haven't had any issues with my account and haven't had a reason to contact Acorns customer service department.

If you do need to contact them you can do so here.

Since I haven't needed to contact them it's hard for me to offer any insight. If you search online for reviews of their customer service you're only ever going to hear the horror stories and complaints so I'd take all of that with a grain of salt.

Judging how few complaints I see online I'd imagine their service is pretty good overall but again, no personal experience so take this with a grain of salt as well.

Acorns Tax Implications

You need to watch out for unexpected tax bills from Acorns (or more correctly, from the IRS). Since Acorns will automatically balance your portfolio to keep your desired asset allocation, they will be selling/buying different ETFs.

If one of your ETFs has a gain you will get a tax bill even if you haven't withdrawn any money from your Acorns account.

Acorns will send you a 1099 form come tax season which details your investment gains.

In addition to capital gains made on your ETF investments, you'll also need to pay taxes on any dividends you receive.

Since Acorns provides you with a 1099 you can use that to do your taxes or just give it to your CPA. If you owe taxes on gains you've made but haven't withdrawn from your account I'd just recommend pulling out the money you owe to cover any tax bill.

Frequently Asked Questions (FAQ)

While doing my research on Acorns and figuring out if I want to use it I saw tons of questions people had online with not many great answers. Here's a rundown of some of the most frequently asked questions people had about Acorns.

Is Acorns A Mutual Fund?

No. Acorns is more similar to a bank/brokerage. A mutual fund is a collection of stocks that you can invest in. An ETF (exchange traded fund) is similar to a mutual fund but generally they're not actively managed which means they have lower fees.

Acorns only invests your funds in ETFs instead of mutual funds. This means the expense ratios are lower for you.

Is Acorns A Scam?

Nope. Acorns is a legit company. You can check out their team here. You can withdraw your money at any time and there aren't any reports of fraud against the company.

Is Acorns A Good Idea?

I think so. Obviously this depends on your exact situation but I think Acorns is a creative way to save a little extra money without having to think about it. I've been able to save over a hundred dollars a month without "noticing" it. 

I think you should focus on maxing out your 401(k) and other tax advantaged accounts before you start saving in an after tax account. You can use Acorns for a traditional IRA which means you can deduct your contributions from your taxes.

Does Acorns Make You Money?

Hopefully! Since I started investing in Acorns earlier this year the market has generally trended downward which means I haven't made money yet from Acorns.

Overall your returns are going to be similar to the overall market. The real point of Acorns is to get your contribution rate up, not to focus on beating the market which is usually impossible for the average investor.

Even if I have a -10% return this year, I'll still end up ahead because Acorns ha automatically forced me to save about $1,200. Losing 10% means I end up with just under $1,100 which I wouldn't have saved if I wasn't using Acorns.

Acorns Average Returns

Acorns average return is going to depend on what your risk tolerance is. If you're invested in more conservative ETFs then you'll tend to have a lower average return. Higher risk allocations will give you higher returns, but this could take a while to materialize.

You can't invest in Acorns or the stock market in general and expect to make money right away. Sometimes the market goes down and since Acorns invests your money in the market, you'll have losses as well. There's no magic bullet to guarantee positive returns in the market and if anyone ever promises you that, run!

What Kind Of Security Does Acorns Use?

The Acorns team knows that nobody would use their app if it wasn't secure so this is a huge focus. In fact, they've got an entire page on their website dedicated to their security protocols.

Here's a quick run down of what Acorns does to keep your account and money safe:

  • SPIC protection up to $500,000.
  • FDIC insured spending account up to $250,000.
  • SSL Encryption which is what banks use.
  • Account alerts if any unusual activity is detected.
  • Automatic logouts and ID verification to prevent unauthorized access to your account.

Who Owns Acorns?

Acorns was founded by Walter and Jeff Cruttenden. It has also raised investments from Paypal, Bain Capital, Ashton Kutcher, Kevin Durant, and a host of other people/companies. You can check out the entire list here.

Does Acorns Work With Credit Cards?

Yes. Kind of.

Acorns can round up purchases that you make on a credit card, that's how I have it set up.

But the withdrawal transfers to your investment account happen from your bank account.

Acorns cannot round up your credit card purchases and immediately transfer that money to your investment account. Your credit card purchases are used to calculate the round up amounts then those round ups are automatically transferred from your bank account to your Acorns account once they go past the $5 thresohld.

What Countries Is Acorns Available In?

Acorns is only available in the United States and Australia right now.

I imagine they'll be adding more countries in the future so you can check back here to see the most up to date list of supported countries.

Acorns Success Stories

I'd consider my last 6 months of using Acorns as a success story. I went from saving no money in after-tax accounts to automatically saving $100 per month. But most "success" stories you see online will depend on what your mindset is.

If you're looking for people who made 20% returns on their investments, you probably won't find any success stories.

But if you're just looking for people who managed to save some extra money for their retirement then their stories are everywhere. That's what Acorns was made for and it does a great job at it. In fact, you can't fail at it unless you bail out and quit using the app.

Acorns Withdrawal Time

Withdrawals from Acorns usually take 3-6 days. The SEC has rules about how quickly money can be transferred after selling an investment which is part of the reason for this short delay.

You can see the official explanation on Acorns website here.

Are Acorns Fees Too High?

This is kind of subjective and will depend on your balance.

The chart I made earlier showing the fees makes it clear that if you're under $1,000 then you'll be paying over 1% in fees which is kind of high.

However, I've had all of my fees offset (and then some) thanks to the Found Money I get from shopping at Sam's Club. This was something I had done in the past and didn't require me to change anything at all. So even though my balance is only about $500 right now, I've been able to recoup all the costs of using the app thanks to the Found Money.

Which Acorns Portfolio Is The Best?

I should probably have some type of disclaimer here about not being a financial advisor, this isn't investment advice, etc etc...so I'll just explain what I've chosen to do.

My 401(k) right now is around $160k, my Robinhood balance is around $10k and my M1 account is at $1k.

My Acorns balance is at $500.

So in comparison to my actual retirement savings, the Acorns balance is almost nothing which means I can be more aggressive.

Because Acorns is intended to be a spare change collector by rounding up your purchases, it will probably have a pretty small balance compared to your other retirement savings accounts which means you can be a little more aggressive.

Of course if you're a conservative person then you can just allocate your funds to match, it's all up to your individual needs.

Is There A Discount For Students?

As of December 2018, yes there is! You can get the $1 per month fee waived from your account if you're a student. Just go here to sign up.

How to Close Your Acorns Account

Closing your account is easy enough, just go here.

Some links on this website may earn me a small commission if you click on them at no extra cost to you. For more information please click this text to see the full affiliate disclosure.

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