Even Squirrels Save Acorns for the Winter

Did you know that one in three Americans has nothing saved for retirement? Experts recommend having five times your annual salary saved by age 50. That’s a lot of Frappuccinos. But those Frappuccinos could actually help you save for retirement with a neat app called Acorns.

What is Acorns?

It’s a platform used by over 3 million people that allows you to save and invest your spare change. You simply link your credit and/or debit cards to the app, and it automatically rounds up your purchases to the nearest dollar and sweeps the change into your investment portfolio. So that $5.42 Frappuccino purchase turns into a $0.58 investment. That’s not much, but it adds up with time and market growth.

How Does it Work?

Once you’re ready to start investing, you can choose one of five portfolios ranging from conservative to aggressive. The app will use your age, goals and income to recommend a portfolio, but you can choose a different one with more or less risk depending on your tolerance. Here’s the breakdown of each portfolio:

  • Aggressive – 100% stocks
  • Moderately Aggressive - 80% stocks, 20% bonds
  • Moderate - 60% stocks, 40% bonds
  • Moderately Conservative - 40% stocks, 60% bonds
  • Conservative - 20% stocks, 80% bonds

Stocks return an average of 7% over the long run, with bonds returning closer to 4%. Remember, this is long-term. Those numbers will fluctuate wildly over the short-term. Most people choose a more aggressive approach early in their career and move to a more conservative approach as they near retirement.

What if I Want to Invest More?

You can invest lump sums manually or set up recurring deposits on a schedule that suits you. Lump sum investments can be as small as $5.

What Kind of Fees Are There?

If you’re a college student with a valid .edu email address, it’s 100% free. Otherwise, it’s $1 per month until your account balance reaches $5,000. At that point, the fee is 0.25% of your account balance per year.

Critics of Acorns argue that the $1 per month fee is a large cut for those with small balances. But it’s $1 per month! That’s not even three Frappuccinos per year! And if it helps you save money you otherwise wouldn’t be saving, it’s worth it.

What Is Found Money?

It’s another perk of Acorns. If you use a linked card to make purchases from their Found Money partners – companies like Apple, Nike, Walmart and Expedia – you get bonus cash in your Acorns account. Offers vary with each partner.

What More Can Acorns Offer?

Sign up using this affiliate link and get a $5 bonus to get started. How about that? :-) In full disclosure, I get $5 too, but we're friends so it's okay.

Final Thoughts

Acorns is good for hands-off investors and people who struggle to save. If you don’t have to think about saving, you’re more likely to do it. And you don’t have to use it solely as a retirement savings account. I’m using it to save for a trip to Australia.