With credit and debit cards dominating the way we do financial transactions, we rarely consider what it would be actually like to carry around loose change. Acorns, a spare-change investment app, is trying to bring back the archaic practice of hoarding those left-over pennies by turning them into a basic investment strategy. The app rounds up your daily purchases to the nearest dollar and takes that extra change and pours it into an algorithm-managed investment portfolio.
Acorns isn’t ideal for aspiring high-rollers, it’s just a way to bring in some extra cash. Acorns has a utilitarian approach to pricing. Subscribers pay $1 a month until their balance reaches $5,000, after that, they only pay 0.25% of their balance a year, so $125, which is considerably more than the initial fee. College students are allowed to use the service for free for four years.
Connected to your credit and debit cards, Acorns collects small amounts of change on everything you buy, so that you don’t have to worry about squirreling away too much money or overdraft fees. Acorns tries to automate the savings process as much as possible, and lets you build a nest egg without having to keep tabs on your stocks. However, the app gives you the option to manually transfer specific purchases or just sweep away every last bit of change automatically. You can also deposit separate funds or schedule reoccurring withdrawals from your savings or checking accounts for as little as $5 a pop.
Even in momentary lapses when your investments plateau, Acorns has other incentives to keep you an active subscriber. The app has partnered with big name start-ups and brands to earn you extra dough on your regular purchases. With Airbnb, up to 1.8 percent of the booking subtotal will be deposited into your Acorns account, and if you’re a host who rents out their home for at least $75 a night, the app will throw $50 into your account after your first night of hosting. When you sign up for a Blue Apron account, Acorns will deposit $30 into your account. Buying a Casper bed gives you an additional $50 investment, and JackThreads will invest 10 percent of each item of clothing you buy back into your Acorns account. Jet.com, Warby Parker, Hulu, Hotel Tonight, Dollar Shave Club, and Boxed have similar rewards programs.
Acorns is geared towards younger investors who are just navigating the market for the first time, and don’t want to make any risky investment decisions. By the same token, Acorns isn’t suitable for people who are trying to build a retirement account, as all investments are taxed. IRA and 401(k) accounts grow without the burden of taxes, and are more beneficial for those who are winding down their careers. That’s why it’s important for Acorn investors to take into consideration the potential tax impact the app could have on their finances come April 15. Unlike other artificial intelligence-portfolio managers, Acorns doesn’t help with tax-loss assistance, which help balance the gains and the losses.
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