Our partner, XM, lets you access a free demo account to apply your knowledge.
No hidden costs, no tricks.
Saving up for the future can be a complicated process. Many people struggle to save up regularly and those savings may be tough to manage alongside other daily activities, such as work and leisure. This is where Acorns steps in to lend a hand. Acorns is a fintech company that offers robo-advisory and savings investment services to its clients. Once a client signs up with Acorns, they can charge a percentage from purchases made from their cards to accumulate funds in their Acorns account. Acorns will then invest these funds in a diversified portfolio of stocks and ETFs to help increase savings and hedge against inflation. Acorns charges fixed monthly fees and offer individual and family accounts to its clients.
Personal investments and savings are at the forefront of discussions during periods of high inflation and market slowdowns. As such, Acorns might be the right tool to help users accumulate savings and hedge against market uncertainties. But are they? - Let’s find out in this investfox review of Acorns.
Acorns is a service for passive investors who would like to accumulate their savings by rounding up purchases to the nearest dollar every time they make a payment for something using their debit card. Acorns accumulate these funds in an investment account and invest them in a diversified set of stocks and ETFs.
Acorns was launched back in 2012 through venture capital and has amassed over $4.7 billion in assets under management on behalf of over 10 million customers as of 2023.
They charge a fixed monthly fee and offer additional choices, such as socially responsible investing, cash backs at select retailers, and educational content. The fees charged by Acorns include a fixed monthly fee, investment expense ratios, and transfer fees. It is a useful tool for passive investors who are not particularly interested in actively managing their savings and investments and do not have the time required to do so.
"We sign you up, you connect your bank, your debit and credit
cards, we round up your purchases to the nearest dollar and then invest the spare change for you and that's how everything starts; and then we introduce you the new products" - Noah Kerner
Acorns has steadily become one of the most popular options for passive investors, thanks to its ease of use and stable savings performance.
Acorns is a relatively simple investing tool to use. Users can actively monitor their total savings and the performance of their investments. The website, as well as the mobile app, have a minimalist, intuitive design, which makes it easy to navigate. The Acorns dashboard allows users to view their assets and their allocations, as well as the total account value. The Acorns app is convenient and all features are easy to access.
Acorns allows users to add lump-sum savings or round up the changes from purchases made using the Acorns debit card held under the user’s name.
Acorns offers individual and family accounts, where users can save up for specific goals, such as their children’s education, purchase of a vehicle/home, retirement, etc.
Acorns portfolios are well-balanced with a mix of stocks, bonds, and ETFs. Users can also use the Acorns Checking Account for cash management purposes, although the checking account does not offer an interest rate.
The app considers the age and goals of the users and uses this data to construct an investment strategy for their savings. Investors can also allocate up to 5% of their funds to a Bitcoin-linked ETF.
Acorns offers different services to its users, who have the option to use Acorns simply as a change round-up account, or actively use the Acorns debit card while they shop to earn additional funds to invest via the platform.
The selection was created with active customers in mind, who prefer to travel and shop frequently while accumulating their savings. We will discuss Acorns’ services in more detail below.
The primary service that has made Acorns a popular investment tool is their ability to round-up the change from purchases to the nearest dollar and accumulate spare change on your Acorns account. The funds will then be invested according to the user’s profile and preferences.
The “Round-up” feature accumulates spare change until it reaches the $5 threshold, after which, it is transferred to the Acorns Invest account, where it is invested in stocks and ETFs.
For example, purchasing a product for $30.60 using the linked card will result in Acorns setting aside $0.40. Once there are sufficient transactions for the money set aside to reach $5, it will be transferred to Acorns Invest and put to work. Users can customize their round-up settings and multipliers to set aside the desired amount proportional to transaction size.
Acorns Banking allows clients to use the banking solutions provided by Acorns, including the heavy-metal debit card and the checking account. Clients can assign an automatic Emergency Fund, which sets aside a fixed amount of money from each paycheck received by the client. Automated savings start from 1% of the paycheck, and clients can choose between Acorns Invest, Early, or Later accounts depending on their needs:
The Acorns checking account is FDIC insured for up to $250,000. Acorns banking offers mobile check deposits and digital checks, alongside other standard banking services.
Acorns clients can also get paid 2 days earlier using a direct deposit, which allows them to invest their funds faster.
Acorns Earn allows users to earn bonus investments while they use their Acorns debit card for shopping. Acorns Earn supports over 15,000 offers from top retail brands, where users can earn additional investments for their savings accounts.
Acorns Earn also offers a free $5 investment when referring a friend. Along with this, Acorns allows users to browse through thousands of full or part-time jobs to increase their savings while they work.
Clients can additionally add an extension to their browser to automatically get bonus investments as they shop online at partner stores.
Acorns Learn is a financial education platform provided by Acorns which covers topics such as stocks, ETFs, retirement accounts, Acorns offerings, and account types, as well as a variety of financial terms and concepts for beginners.
Acorns also has a blog available on its website, where users can read articles about different financial trends, concepts, and strategies for investors.
The primary reason for the popularity of Acorns is its ability to take the hassle of saving away from its clients and make the process all the more simplified. Acorns clients can simply select the ratio of funds to save up from their paycheck, while Acorns rounds up their purchases.
While such a savings strategy may not be enough for a major purchase, such as a house or to replace a retirement account, Acorns is still a very convenient tool to save up some extra cash for whenever you may need it.
The investment choices are relatively low-risk and are geared towards incremental increases in the long run. Acorns is the perfect platform for young people who are working gigs and part-time jobs to accumulate savings using a user-friendly app that includes plenty of educational material.
While Acorns may be a useful tool to increase savings, the costs associated with the service are not the most convenient for users with very low spending habits and limited savings. The standard individual account costs $3/month. Adding the risk and expense ratios of the ETFs chosen by Acorns, it may become evident that a certain threshold is required to fully take advantage of the perks of Acorns. Despite having no account minimum, Acorns does require $5 to move savings to the Acorns Invest account. Family accounts cost $5/month, which is relatively affordable.
Another smaller disadvantage that comes with such saving services is the low total dollar value of the savings. For users to accrue substantial savings, they will need to set aside from their paychecks, as well as round up from transactions, which can take years.
Acorns is a regulated fintech company which adheres to strict guidelines regarding handling client funds and its obligations to have deposits available for clients, which are kept in a segregated account. Accounts on Acorns are also FDIC insured for up to $250,000, which means clients can claim up to $250,000 in case Acorns becomes insolvent. Client data, such as passwords, location, etc. are kept protected, and all general banking regulations apply to Acorns Banking’s products and services.
Acorns also uses third-party fraud-detection services to verify transactions and detect suspicious activity.
Acorns makes money by charging fees for using its services and performing transactions. The fees can be broken down as follows:
Acorns prices may be steep for users just starting out on the platform. $5/month amounts to $60/year, which will be significant for users that start out with just a couple of hundred dollars on an Acorns account. However, once the savings start to accumulate, the monthly fee becomes far less of a concern relative to account value.
While the bulk of Acorns’ revenue comes from subscription fees, the platform charges a relatively high fee for transferring ETFs, which is often offered for free or at a lower price by competitors. This puts Acorns at a slight disadvantage compared to some other companies in this sector.
One inconvenient downside of Acorns is that it does not offer a tax strategy, which means users have to calculate their taxes using Form 1099. This is compounded by the fact that Acorns does not have a human advisor option either, which can lead to confusion regarding the tax handling of Acorns savings.
Users can review the FAQs about taxation on Acorns’ support page, which states that answers are provided for informational purposes only. While taxes apply to the Acorns Early and Acorns Invest accounts, Acorns Later qualifies for tax deductions. However, users will have to pay a penalty if they withdraw before reaching the age of 59.5 years. Any dividend earned by the user that exceeds $10 will be noted on the 1099-DIV section of Form 1099.
Creating an account on Acorns is a fairly straightforward process. Users will need to have a bank account under their own name and a valid social security number and must reside in the United States. Acorns is not available for customers outside of the U.S.
First head over to their homepage and hit the “Get Started” button. You will be prompted to create a username by providing your email address and creating a password. Once you have your credentials, you can verify your account using a valid ID or passport. Input any additional information, such as your residential address, primary phone number, tax information, etc., and move on to select your preferred account type.
You can choose between an individual and a family account, which will charge you $3 and $5, respectively. You also have the option of opening a savings account on behalf of your child, or a retirement account for your savings.
Once your account has been opened and verified, you can link an existing bank account held under your name. Once the bank account has been successfully linked with Acorns, you can choose your savings strategy, including savings from your monthly paychecks.
You can apply for the Acorns debit card using your account, which you can use while shopping online to accumulate additional savings while you shop at your favorite stores.
After you have gone through the prior steps, you can actively start using the Acorns debit card and save up while you shop at thousands of partner stores. The Acorns debit card rounds up your purchases to the nearest dollar and accumulates savings until they reach $5, after which they can be added to your Acorns Invest account. While Acorns does not have an account minimum, they do require your savings to reach $5 to invest them.
Acorns is an attractive option for investors who do not have the time to manage a large portfolio on their own and would much prefer to accumulate small savings from their card charges and paychecks over time. Acorns allows users to put aside a portion of their paychecks and round up debit card purchases to create savings which will then be invested in stocks, bonds, and ETFs.
Yes. While Acorns may not be the best option for building up a massive retirement portfolio, it is a great tool for putting aside some spare change every time you shop, which accumulates over time and could build up to substantial amounts over time. While buying a home or a car may not be as easy or fast using Acorns, it is very convenient for other expenses, such as holidays, major household appliances, etc.
Yes, Acorns users will have to pay taxes whenever applicable. The Form 1099 shows when and how much taxes apply to your investment income. Some gains may be unrealized and some investments may pay dividends.