Jesse Whitehouse Developer | Analyst

Review of Acorns app

I’ve been reading about Acorns, an iPhone app that helps people invest. “Round Ups”, it’s signature feature, rounds each of your connected bank transactions to the next dollar and deposits the extra in after-tax ETFs. The app is beautiful. And Acorns’ website presents animated charts, expert opinions and punchy copy to tout its advantages. But I’m dubious that Acorns is a wise investment option. Here’s why.

1. Not everyone should invest money

One of Acorns’ prominent marketing themes is that anyone can buy ETF’s because the app makes it easy. This line of thinking ignores the reality that not everyone should do so. There is a “right time” to invest money. You should have an emergency fund, be debt free, and consistently stick to a budget. Investments without this foundation introduce unnecessary risk to your life. Emergency funds will protect you from unforeseen expenses. You need a budget to efficiently pay the expenses you can foresee. And the interest you save being debt free will trump your gains in the market anyway. Every additional penny is better spent on these priorities until they are satisfied. You don’t plant Acorns until you feel the ground beneath your feet.

2. Why invest so little?

To get a better idea how much moolah Acorns could save, I scanned my bank statement from last month and rounded them. If Acorns had done this I would have invested ~$30 this month. That’s $360 per year. While this is a sweet chunk of change, it dwarfs when compared to the amount most people will need to retire, pay off their home or start a business. 30 years(!) of investment at this rate assuming a generous 10% return only yields $59,217.85. Those are impressive big bucks down the road, but I think most of us could do even better.

If you have already paid your debts, saved an emergency fund, and taken control of your spending with a budget - you are not the type of person asking yourself “how little money can I save?”. Instead, you habitually look for ways to save more money. So why stop at “Round Ups”? Why not tell Acorns to invest $200/month in lieu of the pocket change option? At that rate, the calculation above would yield $394,785.65 in 30 years. Now that’s more like it! But this bypasses Acorns’ killer “Round Up” feature. So why are we using the app? Why not open an E*Trade or Vanguard account with lower fees, more control, and proven customer service? You could even buy the same ETF’s that Acorns uses.

Still: it looks fun.

I’d prefer to see a service like Acorns that teaches users how to stretch their budgets in paying off debt. Round-Up until the debt is gone. Round-Up until the emergency fund is full. Round-Up until we know how to do that part on our own. And then set us free to find even more fun ways to invest our money.