Author Topic: Acorns Saving and Investing App for Millenials  (Read 921 times)

StudentEngineer

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Acorns Saving and Investing App for Millenials
« on: August 02, 2017, 09:20:35 PM »
Hi everyone! 
I wanted to inform everyone of an app that I've been trying out for the past half year or so.  Its called Acorns and it helps automate saving and investing.  You link as many credit and debit cards as you'd like to the service and you can turn on their Round Up feature which rounds your transaction to the next dollar and invests the difference.  An example would be if you bought a coffee for $1.50, Acorns would take $0.50 and put it into your account with them, every time your balance in their money-market type account reaches $5 they will sweep that money over into your prechosen diversified portfolio.  I typically have $30-$50 a month in roundups that gets deposited into my account, after six months I've got a total of $295 in my acorns account.

If you signup using my referral link and put $5 into your portfolio both you and I will get $5

Link: https://acorns.com/invite/FMGHKR




Further information

Acorns was founded in 2012 by a father and son duo who wanted to build their own platform to make investing easy and open up investing to people who otherwise would be too overwhelmed or intimidated to start investing.  They did this by realizing the main obstacles to investing were
1. It's difficult to get enough money together to get started
2. Commissions often make it hard to invest even $100 at a time 
3. New investors face too many choices ó stock funds, mutual funds, ETFs. This can be overwhelming if you're just getting started.

It has been backed by companies such as PayPal, e.ventures, Greycroft Partners, Rakuten and others.



Security

Check it out here: https://www.acorns.com/security/
* SIPC Protected Accounts every account is protected up to $500,000
* SSL Encryption, both their website and app are secured with 256-bit encryption
* Account Alerts, the user will be contacted if there is any unusual activity on their account
* Bank-level Security, Secure servers and privacy verified by physical security
* Account Safeguards, Multi-factor authentication, automatic logouts and ID verification to prevent unauthorized access

"All of your data is protected with 256-bit encryption and never stored on your phone, tablet or computer.
Acorns Securities, LLC is a Member of the Securities Investor Protection Corporation (SIPC) which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochures are available upon request or at www.sipc.org.



The Portfolio

The user is asked a number of questions to determine their investing horizon and risk tolerance such as age, goals and income.  It then recommends one of five portfolios that range from conservative to aggressive.  You can go with this default recommendation
or you can manually choose one.  For the demographic they are targeting, college students, I'd fully recommend going with the most aggressive portfolio due to their long investing horizon.
The portfolios are made up of low cost ETFs from Vanguard Pimco and Blackrock and consist of the following asset classes: Large company stocks, Small Company Stocks, Real Estate, Government Bonds, Corporate Bonds, International Large Company, Emererging Market.

Some benefits of their portfolios are that the ETFs are commission free and allow fractional share purchases, so that you can invest as little as $5 at a time.

Link to an overview of their investments: https://www.acorns.com/investments



Pros

*Microsaving. 
        Easily my favorite feature as it is an easy thing to set and forget plus it introduces people to saving without feeling pain or inconvenience.

*Automated Savings. 
        Acorns offers the ability to manually and automatically deposit lump sums.  This would be the next step for new investors if they want to save and invest more.

*'Found Money'
       Basically Acorn has partnered with a somewhat short but powerful list of companies, such as Hulu, Apple, Walmart, Groupon, Airbnb, Dollar Shave Club and Jet to give the user up to 10% cash back when they use a linked payment method at one of those companies.  The money will typically be deposited into their account 30 to 60 days from the purchase.

*Grow Magazine
       Acorns also has a personal finance site, Grow Magazine, that is aimed at millenials with advice on numerous financial topics.  It's actually quite a good resource, especially for those who are new to investing.  For instance here was the front page article when I logged in today https://grow.acorns.com/warren-buffett-million-dollar-bet-on-index-funds/
which covers Buffets advice to becoming a millionaire by investing in low cost index funds and being patient.  Another article https://grow.acorns.com/pay-off-debt-without-windfalls-or-six-figure-salaries/2/ covers being frugal and avoiding lifestyle inflation, as well as mentioning side hustles as ways to pay off student debt.  Great information for those who think their student debt is too difficult to get rid of.
If the app draws in college students and then they see articles similar to this giving actually good financial advice, I can't see how they won't be better off in the long term.

*Intuitive interface for both the app and website.

*Dollar cost average small sums of money into a diversified portfolio



Cons

Essentially this is an app geared towards students and those who don't save, so if you fall outside of either of those categories it will be less attractive.

* Fees
   $1 a month if you're not a college student and your balance is less than $5,000.  If your balance is over $5,000 you pay 0.25% per year.

From their website "For accounts of $5,000 or more, pay only 0.25% per year.
Free for college students with a valid .edu address for up to four years from date of registration."   

So if you manage to save $500 in a year with acorns your $12 in fees comes out to 2.4% in fees, which as we know here on MMM, is huge.  So this should be really only attractive to college students who can waive the fees for four years or those who don't save at all and will find a greater benefit using acorns, even with the fees.

You could also say that a con would be the rigid portfolios, with no choice for the user to go 100% stocks, however due to its intended demographic I think that is alright.



Who is this for?

*College students (they can waive the fees with a .edu email address)

*People who are new or have little knowledge of saving/investing (many of my collegiate peers and millenials in general)

For the target demographic, I think this is a great way of introducing them to the world of investing by eliminating the costs and making it very easy.  I can see this as being a keystone habit or step that could lead to further interest in saving and investing, then maybe it'll open their eyes to FIRE.

Ideally, once people have used acorns they will come to see investing as fun and want to explore it further, perhaps buying stocks (check out my robinhood app review for commission free stock buying and the chance to win a share of a company worth up to $150 in my signature)
From my personal experience, several of the spendy non-financial friends that I've recommended this to have started to get excited about investing once they saw how saving just a bit here and there added up.  I've already got a couple making automatic deposits on top of the Round Up feature.  From 6 months they've completely changed their mindset towards investing.





Clearly this is NOT going to make anyone FI on any timeline, however I think it could be very helpful to introduce saving and investing to college students and those who do little to no saving already.  Additionally, the type of people who tend to not invest or save often have several annual crisis when an unexpected expense comes up, having a couple hundred or thousand dollars from using this  app can help them bridge an emergency.  Oftentimes those crisis lead to credit card debt which as well all know can quickly spiral out of control and ruin people's financial lives if they don't take care of it quickly.



If you do sign up, I'd appreciate it if you used my link as it took several hours to put this together.  Thank you!

Link: https://acorns.com/invite/FMGHKR



*Fees are waived for four years following registration with a .edu email address, so if you're in your last year of college you can still get this service for free for the next four years.
*Please do your own independent research before you make a decision.
*Let me know if I missed anything or if you have any further questions.
« Last Edit: August 11, 2017, 08:25:54 AM by StudentEngineer »
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New to saving and investing? Check out my post on the Acorns saving and Investing App!
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DarkandStormy

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Re: Acorns Saving and Investing App for Millenials
« Reply #1 on: August 03, 2017, 11:54:46 AM »
So basically...if I don't know how to setup Vanguard, I should just use this app and overpay massively on fees?
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StudentEngineer

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Re: Acorns Saving and Investing App for Millenials
« Reply #2 on: August 03, 2017, 12:43:02 PM »
So basically...if I don't know how to setup Vanguard, I should just use this app and overpay massively on fees?

Absolutely not.  I 100% recommend the Vanguard route.  However this is aimed at people who don't invest because they are intimidated by it or college students who aren't really exposed to finances
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New to saving and investing? Check out my post on the Acorns saving and Investing App!
https://forum.mrmoneymustache.com/reader-recommendations/acorns-saving-and-investing-app-for-millenials/

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Snow

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Re: Acorns Saving and Investing App for Millenials
« Reply #3 on: August 04, 2017, 12:13:16 AM »
I'm afraid I agree with DarkandStormy. Why waste unnecessary money on fees if people can just invest some time learning proper investment/Vanguard strategies. If you "aren't really exposed to finances" at a college level, it seems about time you were.

StudentEngineer

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Re: Acorns Saving and Investing App for Millenials
« Reply #4 on: August 04, 2017, 02:43:38 PM »
Why waste unnecessary money on fees if people can just invest some time learning proper investment/Vanguard strategies. If you "aren't really exposed to finances" at a college level, it seems about time you were.

I agree that is the best route, but many people do not take the best route and using acorns instead of continuing their habits would put them in a better financial position.
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Check out my post detailing it: https://forum.mrmoneymustache.com/reader-recommendations/robinhood-trading-app/

New to saving and investing? Check out my post on the Acorns saving and Investing App!
https://forum.mrmoneymustache.com/reader-recommendations/acorns-saving-and-investing-app-for-millenials/

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Lan Mandragoran

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Re: Acorns Saving and Investing App for Millenials
« Reply #5 on: August 09, 2017, 01:26:15 PM »
Seems like when people drink XL Diet Cokes with Big Macs to me.

Not good for you in the first place(aka not water), but allows you a mental reprieve for wasting money.

Who knows though, I'm sure for someone out there its really helpful.
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maizeman

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Re: Acorns Saving and Investing App for Millenials
« Reply #6 on: August 09, 2017, 01:46:35 PM »
Given the method of savings (roundup to the nearest whole dollar), it's easy to do a bit of math about how this would work out:

You saved ~$300 in 6 months, or about $50/month. Assuming all the values between 0.01 and 0.99 average out to $0.50 that means you averaged 100 credit card transactions a month or a bit under two credit card transactions per day. I've at closer to 20 credit card transactions month, so I've make $120 in a year and pay $12 in fees (10% expense ratio). But I'm clearly not the target consumer, despite being both a millennial and having a .edu e-mail address.

I'm not sure what a good ceiling on credit card transactions per day is. Let's say coffee on the way to work on the card, lunch on the card, second coffee in the afternoon, uber home on the card, dinner on the card, drinks at a separate location on the card and one other less-than-daily transaction (amazon purchase, gas, groceries, utility bill). So seven transactions/day and $1,277/year saved. That doesn't seem like very much for how much income this hypothetical person must have to keep up the lifestyle outlined above.

And the risk would be that because every time you pull out the credit card you feel like you're doing something good (saving), you'd actually find yourself spending a bit more freely,* and it wouldn't take much to cancel out the benefits of any semi-forced savings plan.

*People already are more willing to spend significantly more with a credit card than they would for the same things if they have to pay cash. Source: http://psycnet.apa.org/record/2008-12802-002
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StudentEngineer

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Re: Acorns Saving and Investing App for Millenials
« Reply #7 on: August 09, 2017, 02:11:50 PM »
Given the method of savings (roundup to the nearest whole dollar), it's easy to do a bit of math about how this would work out:

You saved ~$300 in 6 months, or about $50/month. Assuming all the values between 0.01 and 0.99 average out to $0.50 that means you averaged 100 credit card transactions a month or a bit under two credit card transactions per day. I've at closer to 20 credit card transactions month, so I've make $120 in a year and pay $12 in fees (10% expense ratio). But I'm clearly not the target consumer, despite being both a millennial and having a .edu e-mail address.

I'm not sure what a good ceiling on credit card transactions per day is. Let's say coffee on the way to work on the card, lunch on the card, second coffee in the afternoon, uber home on the card, dinner on the card, drinks at a separate location on the card and one other less-than-daily transaction (amazon purchase, gas, groceries, utility bill). So seven transactions/day and $1,277/year saved. That doesn't seem like very much for how much income this hypothetical person must have to keep up the lifestyle outlined above.

And the risk would be that because every time you pull out the credit card you feel like you're doing something good (saving), you'd actually find yourself spending a bit more freely,* and it wouldn't take much to cancel out the benefits of any semi-forced savings plan.

*People already are more willing to spend significantly more with a credit card than they would for the same things if they have to pay cash. Source: http://psycnet.apa.org/record/2008-12802-002

If you do indeed have a .edu email address then there are zero fees for you, so it can still be useful.  I totally understand how it can reinforce spending on your credit card, but I think there is also a good chance that once they start to see their investments grow they will become more interested in the process.

And like I mentioned prior, I think they will seek out information on how to become more knowledgeable about investing and will start perusing the Grow Magazine, which has a number of good frugal, debt reducing, index investing, and lifestyle tips to get them on track.  Then I think they will start to reconsider their consumer habits.

Is it the fastest way to being financially responsible? No.  But even if it is a longer route to become financially responsible, its better than no route at all.
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martyconlonontherun

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Re: Acorns Saving and Investing App for Millenials
« Reply #8 on: August 15, 2017, 01:10:58 PM »
To me it doesn't make sense unless you are a college student. I set up this for my wife using our joint cards since she has a .edu account with her MBA program. She doesn't save ton since she is trying to pay for the program as she goes along. I figure this would be behind the scenes way for us to invest more without noticing it.

Once the fees start, we will cancel the membership and hopefully by then she will have more free cash flow to mentally be ok with investing more.

StudentEngineer

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Re: Acorns Saving and Investing App for Millenials
« Reply #9 on: August 16, 2017, 08:32:00 AM »
Once the fees start, we will cancel the membership and hopefully by then she will have more free cash flow to mentally be ok with investing more.

Sounds like a good plan to me!  Let us know in a couple months how you like it.
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New to saving and investing? Check out my post on the Acorns saving and Investing App!
https://forum.mrmoneymustache.com/reader-recommendations/acorns-saving-and-investing-app-for-millenials/

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