Acorns – Invest Your Spare Change

Acorns is an app that allows you to invest your spare change. This is an example of micro investing at its best. Basically, when you spend money, Acorns rounds up that expenditure to the next whole dollar. When all the spare change adds up to $5, Acorns invests that for you.

I actually had Acorns last year and liked the app. However, I liquidated the funds in my account because I didn’t think I could upload the data automatically into Turbo Tax. I’ve since found out that Acorns is indeed a Turbo Tax Partner and now they are back in my good graces. Actually, because I had an account with them before, all I had to do was re-link my bank information which took mere seconds. Here’s why I am now signed up with Acorns.

Simplicity

Acorns is very simple to use. You download the app, set-up your account. Within the app you have a funding account. You also have linked accounts. You can link your debit cards and credit cards to Acorns. My funding account is my main checking account. The funding account is the account that Acorns will pull the $5 out of to invest. It’s also the account any withdrawals you make from Acorns are deposited into.

Once you have the accounts linked up and ready to go, all you have to do is spend like you normally do. Let’s say I go to Starbucks and spend $7.59. That’s typical for me. I get a grande cafe vanilla Frappuccino, a bagel, and cream cheese. Well, Acorns will round that up to $8 and will attribute $0.41 to my investment account. Now, the funds won’t actually be pulled from my bank account until all my spare change reaches at least $5. Then, the money is deposited into Acorns, which is then used for investing.

Acorns have 5 pre-built portfolios and all you have to do is choose one. They go from conservative all the way to aggressive. ETFs make up the portfolios and so investors are well diversified. I really love the simplicity of it all. But, seriously though, the best part is that all you have to do is spend money you otherwise would. The app works in the background and invests your money for you. No, you’re not going to get rich investing only your spare change. That’s not the point. However, given that savings account interest rates are next to nothing, if you want an easy way to start investing, alternative options like micro investing should certainly be considered.

No Free Lunch

With my next pay check, I will be transferring $100 to my Acorns account. I may also transfer $1000 out of the $20k bonus I’ll be receiving from work. I’ll likely do this, especially if I do not invest in Lending Club as I’m contemplating doing. The point though is that if you’re considering using Acorns, you should be aware of the fees you’re going to be paying, which is clearly displayed on their site. Note, however, that if you’re a college student, the app is free for four years, so that’s great.

Also, they don’t have an IRA capability as of yet, so you definitely want to explore other options to invest for retirement.

Automatic Savings and Investing

I’m drawn to apps like Digit, Qapital and Acorns. I love the automatic saving features of both Digit and Qapital and the automatic investment feature of Acorns. Still, with all three working behind the scenes, it’s very tough to use a budget, because at times, random amounts of money get withdrawn from my main checking account into these various apps.

However, I don’t generally budget anyway. At least, not in the traditional sense. Dave Ramsey teaches to give every dollar a name before it is spent for that month. I tried that a variation of that. Basically, I would put $20 into envelopes, with the idea that only one envelope can be used a day. I had some success with that approach. That is, spending $20 on anything, but no more than $20 a day. I should probably revisit my envelop system.

Nevertheless, the reason why this works for me is because I do what is called my Conscious Spending Plan. The principle comes from Ramit Sethi’s book, I Will Teach You To Be Rich (affiliate link). The idea is that I can spend money on anything I want so long as the main items are taken care of. So, for me, that’s maxing out my Roth 401k at work and my Roth IRA. As long as I’m doing that, then I can engage in guilt-free spending. That’s not to say I’m going to throw all my money away. I still want to accumulate wealth and income, which is why the third leg of that table is going to be my dividend portfolio. But, based on that principle, I can take extra money and buy a nice suit, try out Lending Club, or anything I want.

Conclusion

I’m very excited about using Acorns again. There’s a decent chance that I might track the progress of that portfolio on my blog. Much like the dividend tracker and the debt tracker, I might create a page devoted to my Acorns portfolio. I might also make it part of the dividend portfolio page. We’ll see.  Acorns is a great way for new investors to get started in investing. It shouldn’t be the only investment vehicle you use, but, under the right circumstances, it might be beneficial to have.

What do you think about Acorns? Do you use the app? Do you recommend its use? Let me know in the comment section below.