We like to talk about savings quite a bit, and with good reason. Frankly, as a country, we’re not doing very much of it.
We’ve talked about easy and fun ways to do that in the past, but a new smartphone app is giving would-be investors an even easier way to start saving and investing. Acorns, currently in beta for both Android and iOS, allows users to round up everyday debit and credit card purchases into a diversified portfolio.
How Does Acorns Work?
Did you buy lunch this afternoon? Say your total came to $8.64 and you paid with your debit card. If you linked your debit card to your Acorns account, the app would round that total up to $9 and deposit the extra $0.37 into an investment account.
Instead of large lump sums that you have to manually add to and manage in a brokerage account, you’re investing anywhere from a penny to a dollar with every account-linked transaction that you have throughout the day.
Acorns requires a little bit of initial setup and then very little else. It’s the smartphone equivalent of that jar on your dresser. But instead of your money just sitting there until you need to vacuum your car out, it grows from spare change into meaningful cash.
What Are You Investing In?
Your Acorns roundups will trickle in to build a diversified portfolio of stocks and bonds. After setting up your account and linking your debit and credit cards, Acorns will ask you about your investment risk tolerance, and you’ll select between Conservative, Moderately Conservative, Moderate, Moderately Aggressive or Aggressive.
To determine your risk tolerance, you need to consider factors like your income, the length of time you have to invest and what your end goal is. Younger investors can be a little more aggressive, as they theoretically have more time to compensate for dips in the market. If you don’t have that much to invest, you might want to play it a little safer so that you’re not as exposed to downward fluctuations in the market.
Acorns will help by providing a recommended risk tolerance based on a questionnaire that it asks all members. You can take their advice or go your own way.
All proceeds are divided into six main investment groups: Large Company Stocks, Small Company Stocks, Emerging Market Stocks, Real Estate Stocks, Corporate Bonds and Government Bonds. Your risk tolerance will determine how much of your money is invested in which group. Tapping on each group within the app explains exactly where your money is going so you can make more informed decisions.
What Makes Acorns Different?
Acorns gives people the ability to invest easily, automatically and intelligently. The app boils down the complicated array of investment products available to consumers into simplified terms. You don’t need to have a PhD in economics from Harvard to understand where your money is going.
But perhaps the most remarkable aspect of Acorns is how it lets you invest every day, without even knowing or noticing. It takes the chore and potential intimidation of managing investments and removes the hassle.
If you have a smartphone and want to get started saving for your future, you should definitely take a look at Acorns.