Acorns Review Automated Investing Scam or Legit - FinaceGourmet (2024)

Note:ThisAcorns review article has been updated with the latest information as published on the acorns.com website.

No sooner than I finished my Digit review, than I saw an ad for another automated savings app on Facebook that takes a different tack for building up your savings automatically with the help of an app and online financial service.

This one is called Acorns. Let’s check it out. Is Acorn legit? Is Acorns a scam? Read on while I do my Acorns app review.

Acorns Review – Legit, Scam, Worthwhile?

Acorns vs Digit

Whereas Digit monitors your bank balance and transfers money its algorithm determines is “extra” into a savings account for you, Acorns rounds up the change on every purchase you make to the next whole dollar amount and automatically saves that money for you. Another version of this type of automatic investing and savings app is Grifin. Grifin does away the clever sounding “round up to the next dollar.” Grifin is a user-controlled automatic app investing. Instead of gathering up a few dollars’ worth of transfers and sending them down into mutual fund land, Grifin take every transaction you make and invests $1 in the stock you just bought something from.

Another difference is where Digit sends your money off to a savings account somewhere, the Acorn app, invests your money in a “personalized investment portfolio.”

Once we know if Acorns is legit, and we don’t have to worry about an Acorns scam, we’ll need to take a look at Acorns investing and see if they are good investing strategies.

Acorns Reviews – Is Acorns Legit and Safe?

To see is Acorns safe, we’ll want to make sure that Acorns is not a scam. The company is backed by some big-name investors, so if it is a scam, some other people got scammed for a lot more money than you ever will. There is also an Acorns app commercial with Ashton Kutcher, and another Acorns ad with The Rock, Dwayne Johnson, so you know they are well-financed enough to pay for them.

According to the website, your money is transferred to an SIPC insured account. (SIPC is the investing and brokerage world’s equivalent of FDIC insured.)

This is all evidence that Acorns is legitimate money app software.

How credit scores work.

Acorns Roth IRA Review

One of the options Acorns offers is called Acorns Later. The later part refers to retirement. As with all of the apps, Acorns recommends an IRA type for you. Depending upon your answers to some questions Acorns will choose a Roth IRA or a Traditional IRA.

The Roth IRA is part of the Acorns Later package, which costs $3 per month. There is a $5 minimum to start an Acorns Roth IRA.

Acorns Traditional IRA Review

Obviously, the Acorns Traditional IRA works the same as the Roth IRA except the IRS will tax any withdrawals you might make, and depending upon how much income you have, you might be eligible to deduct some of your Acorns IRA contributions.

How Acorns App Works

Acorns doesn’t work exactly the way you might think it does based upon the headlines and bold print at Acorns.com.

It’s not that Acorns is a scam, it’s that the actual mechanism it uses to operate doesn’t match up with the concept that is boldly advertised by the company.

This online money service actually has no way to “round up” your purchases unless you use the Acorns debit card or Acorns checking account. Otherwise, that kind of transaction adjustment can only be done by the merchant (like when Safeway asks if you want to round up for cancer research), or by the payment processor themselves.

Instead, the actual mechanism of Acorns is that you link whatever accounts you want to use for your rounding up and investing, and then the Acorns software keeps track of your purchase transactions, what youwould have rounded up if they could actually round up your individual transactions. Then, by linking a checking account, Acorns will then make a transfer of that amount at a later time, once all of your round ups total at least $5.00.

So, Acorns really works like this:

1. You link your Capital One Rewardscredit card to the Acorns app.
2. You buy lunch for $6.37
3. Acorns calculates the amount that rounding up a purchase as $0.63 (it does not transfer any money at this time)
4. You keep buying stuff, and Acorns keeps adding the amounts up
5. When you have at least $5.00 of round up transactions, THEN, Acorns transfers $5 from your linked checking account, no matter where you made the charges originally.

So, if you expect to see each one of your purchases, on several accounts, rounded up to the nearest dollar, that won’t happen. All the money Acorns invests comes from one single checking account, no matter how many accounts you link for spending and keeping track of rounding up purposes.

If you expect to see a few cents transferred out of your checking account every time you make a purchase, that won’t happen either. Mathematically speaking, the greatest possible round up is 99 cents. So, it would take a minimum of six purchases to have any money transferred and invested.Statistically speaking, the average number of transactions before a transfer occurs would probably be around 10.

What you will see is the occasional transfer of $5 from your checking account, a few times every month. The company’s transfers will be listed as ‘Acorns Investment WEB PMTS’ on your statements. There is nothing wrong with this, it just isn’t exactly what you might expect to see based on the Acorn.com marketing copy.

Acorns works as a smartphone app. This makes me nervous security-wise, but with services like Apple Pay, this kind of thing is clearly the future, at least until the first major rip off of people occurs and then the security gets better. The company also says that nothing is stored on your phone, so theoretically, if you lose your phone, there isn’t anything to find. You can manage your Acorns accounts via the Acorns website instead if that seems safer.

Acorn Fees

No Acorns review would be complete without looking at what Acorns costs, and how that fee structure works.

Here is where you want to pay attentionwith Acorns. The company has done something really great by not having minimum account balances or minimum investments. However, investing your money isn’t free, and Acorn does charge some fees, which they are refreshingly up front about.

Acorns fees used to be based upon your Acorns account balance. Now there are three Acorns subscription fees that you choose from depending on what Acorns features you want to use.

If you use the cheapest Acorns subscription, the Lite plan, you will pay a $1 per month fee. On the one hand, this doesn’t sound like much, but as a percentage, this can bepretty steep, especially when you first start using the product. For example, if your round ups for the first monthtotal $25, then a $1 fee is 4 percent. But don’t forget that’s for one month. Annualized, that same fee is something like 48 percent. (That’s not entirely accurate, especially if your account balance is growing, but the point is the same.)

There is also an Acorns Personal Plan that adds Acorns checking and an Acorns debit card. You can also get Acorns retirement accounts like an Acorns IRA or Roth IRA. There is also “money advice,” if you think you need to read a bunch of blog posts about your finances.

The Family Acorns plan adds investment accounts for kids, plus, “exclusive offers and content,” which isn’t anything you can’t get somewhere else.

Remember, if $1 per month is a high Acorns fee for small account values, $3 per month, or even $5 per month is even worse. Be sure to calculate your total Acorns expenses, including ETF fund expenses before you decide is Acorns worth it.

Where Does Acorns Put My Money?

The most interesting thing about Acorns is where it transfers your money to when it scoops out that $5 at a time from your checking account.

Instead of putting your money in a savings account, like Digit does, Acorns invests your money automatically in a stock-based investment portfolio. We cover Acorns investment portfolios performance in the next article, but it is important to understand what this means from a personal finance standpoint.

A service like Digit puts your money in a savings account with no fees. They also pay no interest. That is how they make money. On small amounts that you plan to spend anytime in the next three to five years, this is much better than investing your funds in an account like Acorns does where the balance will fluctuate and you will need some time for your earnings to out pace your fees, and the market’s volatility.

However, if you consider Acorns to be money you are setting aside for the long-term, like a kid’s college fund, or even for your retirement, then this is a very intriguing idea. Just don’t forget, your balance will fluctuate with the markets. The stock market is NOT where you put your short-term savings.

Withdrawing Money from Acorns Investment Accounts

Once you have money invested, you may want to withdraw some of your Acorn money. Withdrawing money from Acorns happens as an electronic deposit back (ACH) into the same checking account your deposits come from. This can take 5-7 business days for the money to be fully available in your account. This is a function of the banking system, and not Acorns’ delay.

If your personal finances require you to have immediate access to your money at Acorns, you need to get an Acorns debit card so you can make same day ATM withdrawals.

The company says that there are no fees or penalties for any withdrawals at any time. There are no ATM fees with Acorns as long as you use in-network ATMs. There is no limit to the amount you can withdraw at any one time via ACH, but ATM withdrawal limits may be enforced on ATM transactions.

Compare Acorns to Other Finance Apps

Finance Gourmet is constructing an ongoing, frequently updated comparison of Acorns vs Digit vs Stash vs Wealthfront vs Betterment and so on. Feel free to take a look.

Acorns Stole My Money

There are scattered reports where people say Acorns stole my money. In most cases that is people deliberately trying to do something not allowed and freezing of funds until it is sorted out. The second most common are people who do not fully understand market risks and are mad that they lost money on their investments. This usually comes with a connected story about how the user did all the right things and pressed all the right buttons at exactly the right times and Acorns stole my money, anyway.

If you actually feel that Acorns was fraudulent, it isn’t some hidden company over in Malaysia or something. Report it to the U.S. bank regulators.

Blue Acorn Reviews

If you are here looking for a Blue Acorn review, this is actually an article about Acorns the financial investing savings app. BlueAcorn provides PPP loan services for self-employed people looking to get PPP loans from the government. I have never used Blue Acorn and have no comment on whether Blue Acorn is a scam or a useful PPP lender service provider.

About the Author

By Brian Nelson – Brian is a former Certified Financial Planner and financial advisor. He writes for the Finance Gourmet and other financial publications. The material provided on this website is for informational use only and is not intended for financial or investment advice. At the time of publication, Mr. Nelson did not own any securities mentioned above, however, that may change at any time without notice. ArcticLlama, LLC, FinanceGourmet.com, and Brian Nelson, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.