How a free app helped me sock away a thousand bucks without really doing anything
(Note: I do not have any financial arrangement with Acorns)
Last summer I ran across a personal finance app with an unusual twist called Acorns. I downloaded it to my iPad, did a little configuring, and basically ignored it. Without noticeably hitting my wallet it has accrued over a thousand dollars in an Exchange Traded Fund (ETF), a basket of stocks and bonds. I personally think that in a world where $55 million Americans* cannot get their hands on cash for an emergency, you’d have to be nuts not to try this thing (or something similar).
How it works: stashing those nuts for the winter
First you give the app some information about you and your finances. I know that sounds scary, but behind Acorns is a completely legitimate SEC-regulated financial institution. Then you connect your credit or debit card(s) and bank account to the app. You’ll see in a minute why this is central to how this works.
Acorns centers around the concept of ‘roundups’. Every time you make a purchase, the app rounds the amount up to the next dollar and the difference goes into your Acorns account. So, if I spend $9.75 on something with my card, it rounds to $10.00 and the $.25 goes into my account. Unlikely to turn into a grand? Well, there are a couple of other neat tricks you can do. They allow you to set multipliers on your roundups. I set mine at 3X, meaning that $.25 becomes a deposit of $.75. Yes, it’s coming out of my pocket but in such small increments, it’s virtually unnoticeable. And it adds up.
Another ‘set it and forget it’
They automate saving too. You can have an amount you choose transferred automatically every month, any amount. This automatic saving will also be relatively unnoticeable if you keep the amount small. For me, I decided to kill some media subscriptions that I’d set and seldom used and transfer that money to Acorns. I didn’t notice those media withdrawals and I don’t notice the same thing now that they are Acorns deposits.
Small purchases count just as much as big purchases
Because the roundup takes place on any purchase that is not a round number, small purchases like a cup of coffee every morning add to the kitty. You will be surprised at how fast these add up!
It is important to note that you can pause, cancel, or increase these deposits at any time and you can also do one-time investments if you have a windfall. Withdrawals transfer into your bank account, generally in 3–6 business days because of a mandated SEC waiting period of two days. However, they are setting up a debit card to go with the accounts though that is still in progress. I have found that the waiting period serves as a deterrent from tapping those funds on impulse.
What about these ETF thingys?
Disclaimer: I am not qualified to give financial or investing advice, nor do I want to.
So, lets see what Acorns says about where your money goes: On their site they have a section that walks you through how these funds work. Yes, you can make a return and you can experience losses (you are investing, so there is some risk but funds like these are designed to help minimize this), depending on what ETFs you choose. They walk you through this process and help you choose what is best for your circumstances.
I think the real value, as in any other automated investment plan, is that they operate in the background and the money you invest is not money you have your hands on. In a country with terrible savings issues, something simple like this can mean having a fallback when things get tough.