Product Reviews

Acorns: A Training App for Novice Investors

Written by John Boitnott

Acorns is an innovative app that helps you invest money with spare change easily. It also includes many other smart investment tools. Read our review.

Saving money is a critical component of any smart money management strategy. It’s important to be prepared for unexpected expenses, loss of income and, further down the line, retirement. The problem is that many people are still struggling to save. That’s where the Acorns app comes in.

Companies like Acorns have recognized the opportunity to help people improve their savings habits. It’s an easy-to-use, spare-change savings tool that also includes a cash-back rewards incentive as part of its app.

Based on our personal experience with Acorns, this is our review of the savings and investment app. Here’s how it works, what to use it for, partnerships and features, and what we felt was good and bad about it as a savings tool and investment app.

What is Acorns?

Rather than put all that spare change in a big jar and take it to a bank later, users can save in a similar way using the Acorns app. This is an app that works with iOS and Android mobile devices, as well as with the Apple Watch.

Acorns is a financial tool that combines an automated savings model with access to robo-advisors. Simply put, robo-advisors help people make people make financial decisions based on mathematical algorithms. The service has other features, such as cashback options at certain retailers and a library of financial education content within the app.

Based on Modern Portfolio Theory (MPT), the app uses automatic rebalancing and dividend reinvestment to optimize your investment strategy. Acorn’s robo-advisors look at your overall demographic data like age, income, and goals. Afterwards, they make investment decisions for you. They then add your money to a portfolio that ranges from conservative to one that is more aggressive in terms of risk and return.

How does Acorns work?

Acorn’s primary directive is to automatically invest spare change you have left over from common transactions. All we had to do was download the app to our smartphone and then link credit and debit cards to make purchases such as groceries, gas, and online orders.

With each transaction, Acorns rounds up to the nearest dollar. Then, it takes the difference from the linked bank account and puts this into your Acorns account, which is actually a computer-managed investment portfolio. You have the option of having Acorns do the transfers automatically or you can manually transfer it, but I prefer the automated process.

Acorns also gives you the option to transfer additional money into your portfolio as a lump sum amount. This can be an automatic process where you set parameters for daily, weekly or monthly lump sum transfers for as little as $5 at a time.

There is no minimum amount required to open an Acorns account, but you do need a $5 minimum balance before you can move the money into one of five investment portfolio options.

Who should use Acorns?

Acorns works very well for the new investor who needs encouragement to get started. Acorns is great for college students, for example, because it provides them with free account management for four years. Students need only to provide a “.edu” email address to qualify for this offer.

The app is also a good starting place for those who find it challenging to follow a savings plan. It’s great for those who want to invest without being actively involved in the process. For us, this app was an effective way to get started on saving. It helps to know it’s working without having to find the time or put in the effort to make it work.

What are Acorn’s partnerships and features?

Top features include its Potential tool. This lets you see the impact that an additional investment would make on your portfolio over time. You can pick a theoretical amount and investment schedule – daily, weekly, or monthly. Then you see how those funds would potentially grow. The Round-Up Multiplier gives you the freedom to multiply the rounding up amount past a dollar so you can choose to double, triple, or even quadruple it.

Acorns also offers a Found Money feature that helps you get cash back to further grow an investment portfolio. Partners in the Found Money program include Apple, Airbnb, Blue Apron, Expedia, Nike, DirecTV, Lyft and more. The cash-back percentages vary by retailer. Some offer a reward for signing up, while others provide cash back on first or ongoing purchases.

The app also now offers gift cards online and through certain retailers so you can get someone else started on the road to saving and investing. Recently, we purchased a few $25 digital Acorns gift cards to give as graduation gifts to some high school students who can use the program as they enter college.

Acorns adds more value as part of its goal to help users save and invest more for the long term. This includes Acorns Later, a series of retirement accounts connected to the app.

What are the good and the bad aspects of Acorns?

What I like best about Acorns is how easy it was to get started and continue using. I don’t have to know how MPT works to use the Acorns investment program because it handles all that for me. This takes much of the anxiety out of the investment process.

We enjoyed the extensive financial literacy information Acorns made available to its users. This includes interviews, news, how-tos, investing basics, a glossary and articles. Reading through this content can prepare investors to make more informed financial decisions and form better habits. Together, these benefits take the intimidation out of investing. If you like to see results quickly, even the smallest savings efforts soon add up.

However, there are some disadvantages to using Acorns for some users. The monthly fee amounts can really start to add up, depending on which features you use. For example, it’s only $1 per month if you just use Acorns Core,  the taxable investment account. But, the fees increase to $2 per month if you add an IRA or $3 per month if you use and link an Acorns checking account (Acorns Spend). If you don’t fuel the account with funding over time, these fees could start to work against you.

Acorns offers a somewhat small portfolio of investment options, which might seem restrictive. However, this range can feel comfortable for people with limited investing knowledge. It gave me time to learn more about what the robo-advisors selected. And, it’s important to remember that, like any investment you make, there is the possibility of losing money. However, the investments Acorns recommend seem to be fairly conservative and risk-averse. However, it may not be right for you if you’re looking for more aggressive investment strategies.

Acorns - Invest your spare change from everyday purchases


The Bottom Line

Acorns offers an effective way to get started for the novice saver and investor. It’s a simple way to start building a financial future with very little effort required. Think of it as an investment training app.

I recommend college students try this micro-saving strategy. Gig economy workers who may not have access to other investment products right now will also find the app helpful. Some may want to leverage Acorns as a launching point to take what they save and move it into a larger investment platform to help it grow more.

About the author

John Boitnott