That approach won’t get you to retirement, but it’s certainly a useful tool to save more. Acorns is free for four years for college students with a valid .edu email address. Other investors pay $1 a month until their account balance hits $5,000, then 0.25% of their account balance per year.
- Management fee: $1/month for accounts under $5,000; 0.25% for accounts of $5,000 or more
- Account minimum: $0
- Promotion: College students get up to four years free
Compare Acorns with other robo-advisors
Acorns is best for:
- College students
- Hands-off investors
- People who struggle to save
Acorns at a glance
|Account management fee||$1/month for accounts under $5,000; 0.25% for accounts of $5,000 or more|
|Investment expense ratios||Exchange-traded fund expense ratios average 0.10%|
|Portfolio||ETFs from up to seven asset classes|
|Account minimum||$0 to open account; $5 required to start investing|
|Account fees (annual, transfer, closing)||None|
|Accounts supported||Individual non-retirement accounts only (Acorns says it will add retirement accounts in 2018)|
|Tax strategy||Not available|
|Automatic rebalancing||Free on all accounts|
|Customer support||Phone support Monday-Friday, 9 a.m. to 8 p.m. Eastern. Email support.
|Promotion||Free for college students with a valid .edu email address for up to four years from sign-up date|
Where Acorns shines
Free management: Acorns goes after its target market — young, would-be investors who have little money to invest — by waiving management fees for up to four years for college students who register with an .edu email address. College students, specifically those who don’t have earned income and can’t contribute to a tax-advantaged retirement account like a Roth IRA, are ripe for this kind of service and could wind up with a nice little pot of money after four years of rounding up.
Automated approach: We’re behind any tool that encourages mindless, automatic saving. If you don’t have to think about saving, you’re more likely to do it. This is why 401(k)s, which take contributions directly out of your paycheck, work well, and why auto-enrollment in those plans has more people saving for retirement.
Though Acorns doesn’t manage 401(k)s, it piggybacks on this concept by sweeping excess change from every purchase using a linked account into an investment portfolio. You can connect as many cards as you want, though all roundups are taken from the same linked checking account. With each purchase, Acorns rounds up to the nearest $1 and gives you the option to transfer that change into an investment portfolio. You can do that either automatically, so every purchase is rounded up and the change transferred, or manually, by going through recent purchases on the app and selecting which roundups to transfer.
Although these roundups are the bread and butter of Acorns’ platform, you can also invest lump sums manually or set up recurring deposits on a daily, weekly or monthly basis. Lump-sum transfers may be as small as $5.
Minimum investment: There’s no minimum to open an account, but the service requires a $5 balance to start investing in one of Acorn’s five pre-built portfolios.
Found Money: The only thing better than building an investment portfolio out of a bunch of spare change is building an investment portfolio out of someone else’s money. Acorns’ Found Money program essentially lets you do that: It’s cash back for your investment account.
Acorns has partnered with more than 100 companies — including Apple, Nike, Blue Apron and Airbnb — to give you cash back when you use a linked payment method at one of the partners. In most cases, you get the cash back automatically, without an additional step. You simply use a card linked to an active Acorns account to make the purchase, and the Found Money rewards will land in your account in 60 to 120 days.
Educational content: We found the website well-suited to new investors, as it defines key terms and uses clear language. Acorns also publishes Grow Magazine, an online personal finance site geared toward millennials with advice about side gigs, credit card debt, student loans and other financial topics. Grow content is also integrated in the Acorns app. Acorns also offers a five-step financial literacy course for free to Acorns customers, on Udemy.com, an online learning marketplace.
Where Acorns falls short
Account options: One of Acorns’ biggest shortcomings is that it offers only individual taxable accounts. Acorns says it plans to offer individual retirement accounts (traditional, Roth and SEP IRAs) in early 2018, but as of publication time, the only accounts offered are taxable accounts. That may be fine for a college student who doesn’t have the income to qualify for an individual retirement account, but investors who do qualify for an IRA should prioritize maxing out that account or a 401(k) before directing any significant money into a taxable brokerage account.
IRA and 401(k) accounts are tax-advantaged, meaning investments grow tax-deferred or tax-free. More significantly, a 401(k) may come with an employer match, which is free money. (We stand corrected: Building an investment portfolio out of free money is even better than found money.) It’s fine to use Acorns to bank a little extra in the form of change, but you should do that in conjunction with regular contributions to a retirement account. Acorns should not be your sole savings strategy.
» Interested in IRAs? Learn about these accounts and whether they’re right for you in our IRA guide.
The other issue with offering only taxable accounts is, of course, taxes. This is an issue not just with Acorns — it’s true of all taxable accounts — but younger, less experienced investors may not realize their account may have a tax impact, so we want to spell it out. And Acorns doesn’t offer the tax-loss harvesting assistance that other robo-advisors often provide, which can reduce capital gains taxes by harvesting losing investments to offset the gains from winning ones.
Management fee: Those who don’t qualify for the free management promotion for college students pay $1 a month on balances of less than $5,000 and 0.25% of their account balance per year on balances of $5,000 or more.
That 0.25% fee is roughly in line with what other robo-advisors charge, including the two leading independent services:
- Wealthfront waives its fee on the first $10,000 invested ($15,000 for NerdWallet readers), then charges 0.25% on amounts over that.
- Betterment charges 0.25% for its base Betterment Digital offering. For customers with $100,000 or more invested, the company also offers Betterment Premium, which includes access to a team of financial advisors, for a 0.40% fee.
Those services have more account offerings, tax assistance, better user interfaces and more diversified portfolios.
That said, Acorns’ fees align with competitor Stash, and Acorns provides more value than that service by way of roundups and portfolio management. Our major gripe with the costs at both services is the same: The $1 fee sounds cheap, but $1 a month can be a high percentage of assets for investors with small balances. If you make only roundup contributions, you could hover in that zone for quite a while. An investor with a $500 balance would pay 2.4% in management costs.
Small portfolio: Like other robo-advisors, Acorns takes the investing reins from the user. The app considers your data — including age, goals, income and time horizon — and then recommends one of five portfolios that range from conservative to aggressive. You can accept that recommendation or choose a different portfolio that takes more or less risk.
The portfolios themselves, though, are smaller than the average robo-advisor portfolio, made up of low-cost iShares and Vanguard exchange-traded funds that cover just five to seven asset classes, depending on the portfolio: real estate, large-cap stocks (domestic and international), small-cap stocks, emerging markets, and corporate and government bonds.
Is Acorns right for you?
If you want to make the most of your spare change and get the occasional retailer kickback, there’s really no better place to do that. The automatic roundups at Acorns make saving and investing easy, and most investors will be surprised by how quickly those pennies accumulate.
But until Acorns adds tax-advantaged retirement accounts like IRAs to its lineup, the service isn’t a serious investment solution by itself and should be used in conjunction with those accounts, not instead of them. And even when Acorns adds retirement accounts, be mindful of potentially high fees if your account balance is low.