Now that plastic is used for most transactions, an app can replace the coin jar.
It’s called the Acorn app and it enables you to automatically save spare change – almost without a thought – when you use your plastic to buy a coffee, groceries, pay bills, or anything else, by rounding up the transaction to the nearest dollar.
How does it work?
Acorns automatically rounds up the transaction, say from $3.85 to the nearest dollar, $4 and places that extra 15c into the diversified portfolio you’ve selected from the five options designed and managed by Acorns. You only need $5 in the account to start the investment process.
The portfolio options, built from exchange traded funds (EFTs) range from conservative through to aggressive.
The app designers believe that technology makes it easier for people to save and invest, particularly as most transactions these days are done with a credit or debit card. The app reports the investment in real time and you can see a history of investment and performance in the portfolios through the app on the round-up page. There’s also a monthly statement that can be downloaded and a tax statement.
How much does it cost?
For balances below $5000 the annual account-keeping fee is a flat $15. For amounts over $5000, Acorns charges 0.027% of the balance a year.
Additional voluntary deposits of any amount can be made, either occasionally or as a recurring deposit, to boost the balance.
Technically money can be withdrawn at any time with a couple of swipes of the app wherever there is an Internet connection.
The upside is that it’s a simple and painless way to start investing with small amounts of money.
The downside is that unless you use your card a lot or make extra contributions, the portfolio will hardly make you rich. While the app itself is free, the fees can eat into your savings.
