Money Talk: Why planting Acorns won’t get you trees

The spare-change app doesn’t measure up


As people constantly search for the next easy and convenient product, diet or app, they find themselves looking back and wondering why they ever got into a trend.

Recently, people have taken to the spare-change app Acorns, based out of Newport Beach, California, in the hopes of growing their own money trees. Rounding up your change from purchases, the app builds a diversified portfolio managed by the Vanguard and Blackrock investment firms.

At face value the app is an amazing concept, but after using it and gaining a deeper understanding of it, the luster of first appearances quickly fades.

The first problem with the app comes with its intended use, which is to create a fund to use with spare-change rounded up from purchases over the course of at least 20 years.

Are you comfortably leaving cash in an app-based institution for years when you’ll be changing phones on a yearly basis?

Also, is a little over $1,000 really that enticing when you’ll be getting it when you’ll most likely already be established financially?

While the backing of firms such as Vanguard or Blackrock is great, you’re better off doing two things: Either putting your funds in a high-yield savings account or opening an account with these firms directly.

This is where we get to the second issue of the app: fees.

The app has two ways of charging its users. For accounts under $5,000, the app charges $1 a month and charges 0.25 percent for accounts over $5,000.

While it doesn’t seem like much to pay, why would you pay anyone to hold your money?

If you have $5,000 to invest why would you put it into an app that specializes in investing people’s spare-change?

The reason you would be better investing anything under $100 into a savings account is because when you’re investing such small amounts into an investment account, you won’t see any significant gains – maybe a few cents on a good market day.

The app is best used by those with no knowledge of investing or saving to get interested in the topic and confident enough to do it on your own.

Think of it as finance training wheels – it shows you what your portfolio consists of, fractional shares of various bonds and stocks and, hopefully, will create an interest for you to go out and look into it outside of the app.

Conveniently, there is a feature that allows you to make $5 just for inviting a friend that signs up for an account, which is not a bad way to make some side money.

In addition, there are no account minimums and students can sign up for free if they use their school email address.

As a previous user who liquidated his account, I would encourage those looking to become somewhat savvy in investment to use it and play around with it.

But don’t expect a money tree from your acorn – you might find yourself paying out sooner than later.

Kenneth Kashif Thomas is an arts desk editor and can be reached at Follow him on Twitter at @KenUBSpec.