Day three – every dollar counts – A is for Acorns

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This mighty oak tree grew from a tiny acorn

I have always believed that every dollar saved is valuable and that the little things add up. Now there is an app that helps prove that.

When I first heard about Acorns I was intrigued but I didn’t see a need.  That was until my (now) fiancé Neil started staying over.  Each night he would empty his pocket of spare change.  He asked me for a bowl to put the money into. Over time the coins filled up the bowl.

“That’s a of money,” I said one day.  “What do you plan to do with it?”

“Well, not much to be honest,” he replied. “Usually I just let it sit and after a year or so maybe I take it to the bank.”

Hmmm. I thought. There must be a better use for that money.  Then I remembered reading some posts by other money bloggers about Acorns, so I decided to investigate.

What is Acorns?

Acorns was founded in California by father-son team Walter and Jeff Cruttenden.  It now has an Australian arm.  Acorns is a platform that enables micro investing into Exchange Traded Funds.  It is a cool idea because it enables you to get into investing with little start-up capital and low fees.  Its fee of $1.25 per month is affordable for many people.  (Note that if you only had a low amount in there, say $20, proportionally that more than other products that charged based on a percentage.  I am assuming, though, that for most of my readers $1.25 a month is not going to break the bank.)

Acorns is super easy to set up and use, and the app in particular is very interactive. I think of it as kind of the Tinder for investors. I find it oddly addictive.  I love logging onto the app and seeing how things add up, and it has been a great way for me to demonstrate to Neil how quickly our little savings can multiply.

I think Acorns is a particularly good introductory portal for young people, or new savers, to get into investing.  This is because it is easy to use and install.  It also has short and focused emails that update you about Acorns and investing I general.  It is an excellent way to appreciate the value of compound interest and investing.

Of course, like any form of investment there are risks.  An Acorns investment has, say, a higher profile of risk than a high interest bank account.  But assuming the market continues to perform well, on average it is likely to bring you better returns.

Why it has taken me so long to use Acorns

Until Neil and his coin bowl, I hadn’t seen a need for Acorns.  This is because the predominant focus of my savings was paying off my mortgage as quickly as possible.  Whenever I, say, went to the café to buy a chai latte or a treat but then decided not to, I would go back to my desk and transfer the equivalent amount onto my mortgage.

I also didn’t rush out to use Acorns because I have an existing Vanguard account. This means that I am already investing in exchange traded funds. I like how my Vanguard fund is performing, and I regularly contribute to it.  But a limitation is that you need $5,000 as a minimum to start a new fund.  From there you can add to it in $100 increments (via Bpay).  This makes it harder to use it to incentivise small, regular savings.  In the past, I have kept a diary record of savings and, when it reached $100, transferred an equivalent amount across. But Acorns is much easier.

Our Acorns experience

Neil and I are using Acorns to save for our wedding.

We started with the money in Neil’s coin bowl – that came to $70.  I took the coins and spent it, and transferred $70 from my bank account into Acorns.

I now put into Acorns the equivalent of any loose change I find lying around (i.e. I put the coins in my purse and transfer into Acorns). I also add to that savings (e.g. coffee or tea that I don’t drink), and the proceeds from decluttering around the house (e.g. I sold some unwanted camping stuff that was taking up space for $30 just before Christmas).  Neil has also been putting unspent travel allowance into the fund (e.g. if he goes away on a work trip this gives him an incentive to buy food from the supermarket rather than dining out – that said, he is off work for a while after his heart attack so won’t be going anywhere).

I have also earned around $20.33 from Found Money (see below).

We started Acorns three months ago. We now have $841.91 in there.  This includes $1.44 of reinvested dividends, $2.44 from market returns (note that the $1.25 a month fee appears to come from this) and $20.33 from Found Money.

How to set up an Acorns account?

Download the Acorns app from the Appstore or Google play on your smartphone (or go to the website).

Acorns Australia has a refer a friend program where you get a $2.50 bonus and your friend who referred you gets $2.50 commission. If you think this product is right for you I would love you to support me by using this link that provides me with $2.50 commission (and $2.50 to you).

app.acornsau.com.au/invite/
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When you sign up, you need to provide authority to link back to an online account that you own.  This was quick and painless to do, and after a short wait (from memory around a day) I was up and running.

I had expected it to take ages to set up an Acorns account. I had imagined having to do 100 points of identification, undergo security checks, sign documents etc etc. But I was pleasantly surprised by how quick this was.

What’s with the roundup function?

This took me ages to get my head around.  But basically, it works a bit like Neil’s loose change bowl.  Say he bought a large coffee for $4.50.   If he used a $5 note, he would put 50c change in his pocket, it would go into the loose change bowl, and I would then take it out and put it into Acorns.

Instead, this is done electronically.  If you bought a coffee for $4.50 using your nominated debit or credit card, Acorns notes this and puts 50c aside.  If you bought the same coffee with the same card from your work café each day, at the end of two weeks you would have $5, which you can transfer into Acorns (there is a minimum $5 for round ups).

The idea is to trick you into saving by investing small amounts regularly.  I tend not to use this function because I am already frugal enough as it is, but it is a good way to get into the discipline of saving without realising it.

What’s with found money?

This was another concept that I took me a while to understand.  Basically, Acorns has partnerships with a number of big name online retailers.  Ms Frugal Ears, who says she doesn’t shop online or spend money hardly ever, still found several merchants on there that she uses regularly – including Catch of the Day, Virgin Australia, BCF and ebay.  Some of the found money partners are also in the Entertainment Book membership, so there are potentially further savings to be made this way.  The list changes as special deals are made available.  But in part because of this, I purchased nearly all Christmas presents through Catch of the Day and ebay.

If you purchase via the link on the Acorns app, you will receive a small financial bonus reward paid into Acorns.  Each merchant provides different incentives.  Obviously if you don’t really need something it isn’t a saving, but if it is already a good deal and something you need, this can add a few extra dollars to your Acorns account.

Recurring payments

Acorns also has a function that allows you to make regular savings into it from your nominated online bank account.  This is a good way to get into a regular savings habit. I don’t do this as I already put in regular savings into my super, Vanguard and my mortgage, but I recognise this is a good way for entry-level savers to start investing.

Little Acorns

Acorns recently launched Little Acorns to help children save. I was really excited about this, and so were my kids, but in the end I found it to be a bit of a non-event.  My kids loved choosing colourful ‘Little Acorns’.  They got the idea of compound interest.  What didn’t work for me is that it not so easy for them to make small regular contributions,  e.g. I wanted to take $1 or $2 from their pocket money to put into Little Acorns.  But I couldn’t really do this.

Instead, and perhaps because of Australian taxation laws on children’s accounts (I’m assuming here), the account sits under the parent ‘Acorns’ account.  I could only start with a minimum of $4.21, and there is a sliding scale that adds more money (from my account) via a percentage of the total.  I can’t really add to it in easy $1 or $2 increments, and the money cannot be realised until they reach 18.  The thing I do like about this, however, is that it gives an indicative payout figure for when the fund reaches maturity.

Ms Frugal Ears verdict: I like Acorns as a product to help incentive small savings. I like how it demonstrates the value of compound interest.  It is a whole lot of fun and I am addicted.  The fees are slightly higher than comparable products such as Vanguard, but not too high. It is super easy to set up, but it is not a toy.  This is still an investment vehicle, and like any investment, there are benefits and risks. If you are a conservative investor who wants a low-risk product, you would be better off with a savings account from a bank with a decent interest rate.

How do you save your loose change? Do you have a piggy bank?  A coin bowl? Or perhaps it just drops out of your jeans pockets into the bottom of your handbag.  Why don’t you consider opening an Acorns account to put that money to use?  Or encourage a teenager, University student or someone who is at an early stage in the workforce to start saving?  And stop by the Frugal Dare to Millionaire Facebook group to talk about your loose change saving strategy.

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