Acorns Grows Small Change to Big Investments

02/06/2015 03:42 pm ET | Updated Jun 19, 2015

Acorns is a new free app that helps you turn small change into big investment dollars. It lets you use your smart phone to invest the change from your everyday purchases, by automatically "rounding up" those purchases and investing the difference in a diversified set of investment portfolios.

Designed to appeal to a younger, more mobile-oriented generation, the app has the backing of Nobel prize-winning economist Dr. Harry Markowitz, who helped create the five investment portfolio choices.

Although it was launched less than a year ago, Acorns (be sure to use the plural in your iTunes, Amazon or Google Play search for the app, or go to already has had more than 20 million transactions invested in its funds, representing more than $10 million in small change directed into the accounts.

(And yes, after seeing how easy it is to use, many have added additional, larger amounts to their investment accounts, since there no minimum or maximum investment!)

How it Works

There is a three-step sign-up process for getting started after you download the app and create a PIN that you will use to log into your Acorns account in the future.

• First, choose a "Round-Up" account that will be monitored for any transactions that could be rounded up when you make purchases. It's easy to choose among major banks and credit card issuers, and you can have more than one "Round-Up" account monitored. You'll have to input your log-in credentials to allow secure access to your account. Acorns uses the highest level of bank encryption security.

• Next, connect your checking account. (Note: This account could also be one of your Round-Up accounts.) This will be the one account from which all those small change roundups will be transferred to your investment account at Acorns.

• Finally, you will be asked to create an investment account online -- a simple process that asks for your full name, address, birth date, phone number, and the creation of a security question. It's as if you were opening a brokerage account -- so at this point, you will be asked a few SEC-required questions about your income, net worth and investment goals. Answers to these questions are the basis on which Acorns will make a simple recommendation for one of its five portfolios, ranging from Conservative to Aggressive, for your investments.

The investment portfolios are made up of ETFs, chosen and rebalanced by a group including Dr. Markowitz, who has the final say on which ETFs in which proportions best represent the goals of the portfolio. (Details on the investments within the portfolios are available when you download the free app and before signing up.)

After you have completed the signup, Acorns will automatically round up all future purchase on the accounts you have chosen -- checking and credit card -- and once the total has reached $5 -- yes, only FIVE DOLLARS -- the money will be transferred into your chosen investment portfolio. That could happen as frequently as daily, if you make a lot of transactions on your credit cards or pay bills through your designated checking accounts.

Fees, Costs and Obligations

The app is free. The fee is $1 a month, until you have $5,000 in your account. Above that amount the fee is 25 basis points (0.25 percent) per year -- very competitive with the typical mutual fund management fees. There is no commission on purchases or to maintain the account. And if you want to withdraw some or all of your investment, the money will be put back into your checking account the day after your request, with no withdrawal fee.

Jeff Cruttenden, cofounder and COO of Acorns, is a man with a mission -- to get mobile-tech savvy people to start investing while they are young, and time is on their side. He says the current profile of users skews to Millennials, and that the average monthly "round-up" is about $40 to $50 per month. Cruttenden says the automatic nature of the investment and the small amount involved "helps people think long-term and not obsess over short-term market fluctuations." On the horizon is the ability to offer these Acorn investments inside a custodial IRA format.

Acorns is the modern-day version of the "penny jar." Only instead of just saving the small change, you can invest it in a sensible, low-cost diversified program to reach your goals. It is very simply a way to nickel and dime your way to wealth! And that's The Savage Truth!