How College Students Can Make Money Investing with Acorns

acorn investing for college students

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Okay, so I know I’ve talked about the Acorns investment app a few times in the past on this site, specifically when talking about why college students need to start investing when they’re still in school and about how college students can get started investing.

You might be wondering why it’s my go-to when I talk about easy ways for beginners to start investing. Luckily,  I have an easy answer: Because I love it. I personally use Acorns to manage my own investments, and I recommend it to literally everyone that I know who wants to get started investing. I’ve convinced four friends to sign up for it, two family members, and one date. You can believe me when I say that I love the app, because I wouldn’t lie to my friends, family, and paramours.

That being said, before we begin, I want to spell out the fact that if you read this article, click on the link that I provide to sign up for Acorns, and do actually sign up for the service, I do earn a little bit of money. Specifically, I earn $5 that will be deposited directly into my Acorns account. But so do you! This might seem like it’s incentive for me to talk up the app just to get people to sign up, but that’s honestly not the case. I wrote this article because I believe that Acorns is a.) a great service, b.) a great way for college students to start investing, and c.) an easy way to mindlessly start saving and investing money.

Okay, now that that’s out of the way we can dive into the meat of the article. Namely, what is Acorns? How does Acorns work? And how can college students make money with the Acorns app?

What is Acorns? How does Acorns work?

Acorns is an app that was created explicitly to help people start investing, regardless of how much or how little money they had. So many people put off getting started investing because they don’t have a lot of money to open an account. But with Acorns, all you need to get started and open an account is $5—not the hundreds or thousands that other investment apps and services often require. This makes it ideal for college students who likely don’t have thousands of dollars to start investing.

Want to learn the basics of investing? Check out our guide to the essential investment terms and definitions for beginners!

If you decide to open an Acorns account, your first step will be to link the app with a debit or credit card (or both), which is how money will be transferred into your account. Once you’ve done that, you’ll need to select a portfolio, based on your risk tolerance, investment timeline, and investment goals.

Did reading the above sentence make you scratch your head? Yeah, me too. Especially when you’re just getting started, talking about things like “risk tolerance” and “investment timeline” can be hard, but it’s a critical step. If you can’t put these things into words, then you won’t be able to choose a portfolio that best suits your needs, and if you can’t pick a portfolio that suits your needs, you probably won’t like investing all that much. Bummer.

Luckily, the app comes with a built in quiz designed to help you figure out which portfolio best matches your needs. It’ll ask you things like “When do you expect to need your money?” to help you figure out your timeline; “How much volatility can you see in your investments without panicking?” to help you figure out your risk tolerance; and “What do you want to use this money for?” to help you articulate your goals. And, based on your answer, the app will tell you which of their five portfolios (below) it thinks is best for you. You can choose to ignore their advice if you want, but if you’re just getting started you might want to stick with their suggestion.

Acorns Fees: How much does Acorns charge?

The app is incredibly cheap to use. College students with a valid .edu email have all fees waived for four years from sign-up, meaning that you can begin investing and growing your money for four whole years for free. That doesn’t happen in the real world, so take it while you can! After that, you’ll pay $1 a month for access to Acorns, $2 a month if you want access to Acorns & Acorns Later (more on that below) and $3 a month is f you want access to Acorns, Acorns Later, and a third mystery service  that they’re going to be announcing later this year. And you’ll continue paying these rates ($1, $2, or $3 per month) until your account is worth a whopping $1,000,000.

In the past, Acorns charges $1 per month for accounts less than $5,000 in value, and .25% after your account has exceeded $5,000 in value. For those who are bad at math, that means that an account worth $5,000 would be charged $12.50 each year, (or $1.04 per month). As your portfolio grew, you would pay the same .25%, regardless of amount. So a portfolio with $100,000 would pay $150 per year, or $20.83 per month.

To add some perspective, most managed accounts can charge upwards of .75–1.5% or even 2% making these rates as close to free as you could get without building your own portfolio from scratch. (And even then, you’d be paying fees on every transaction you make.)

With the new pricing structure, you are charged $1, $2, or $3 per month (depending on which services you want) until your portfolio is worth $1,000,000. That means that every dollar you add to your portfolio LOWERS the effective cost of your investments, which is truly unheard of.  If your portfolio is worth $5,000 and you pay $1 per month, then your expense ratio is .24%. Jump up to $10,000 and your rate drops to .12%, because you are still just paying $1 per month.  Jump up to $100,000 and your expense ratio become .012%. And if you manage to build your portfolio up to $1,000,000? Your expense ratio drops to an insanely cheap .0012%.Acorns-Investment-App-New-Pricing-ModelI’m not sure what the expense ratio will become for accounts worth more than $1,000,000, but I would expect it to be at least .25%.

What kind of portfolios does Acorns offer?

Long story short, a portfolio is simply your collection of investments. Broadly speaking, portfolios are split into a number of different “asset classes” like stocks and bonds, which vary in terms of how “risky” they are. Stocks are usually considered more risky, and bonds are considered less risky. The exact breakdown of your portfolio, and what percentage is taken up by each asset class, will depend on your risk tolerance and timeline.

Acorns has 5 portfolios for investors to choose from: Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive. The conservative portfolio is the “safest” portfolio, consisting mostly of bonds, while the aggressive portfolio is the “riskiest,” consisting entirely of stocks.

Acorns Conservative Portfolio

The Conservative portfolio is made up mostly of bonds. Because bonds are a safer investment, you shouldn’t see too much volatility in terms of the value of your account; it’ll be relatively stable. The bonds will give you access to some small growth, while the few stocks you are invested in will hopefully help you capture more growth, without risking too much of your investment. Unfortunately, because there is so little risk, there is also much less reward: Being invested mostly in bonds should allow you to at least keep up with inflation, but you won’t substantially grow your money. The conservative portfolio is best for someone who can’t stomach volatility or who expects to need their money in the short term.

Acorns Moderately Conservative Portfolio

The Moderately Conservative portfolio still consists mostly of bonds, but incorporates more stocks into its allocation. This will help keep your investments stable while allowing you to grow your money and hopefully outpace inflation. This portfolio, along with the next two, are suited for people who expect to need their money in the short- to mid-term.

Acorns Moderate Portfolio

The Moderate portfolio holds 40% in bonds and 60% split amongst a number of types of stocks. This will allow your account to stay stable while also helping you capture growth. Most investors are probably the most comfortable with an asset allocation like this one, since it pairs growth and stability fairly evenly.

Acorns Moderately Aggressive Portfolio

The Moderately Aggressive portfolio consists mostly of stocks, allowing it to potentially gain a lot of value. It does still hold some bonds, though, for stability. The aggressive portfolio is best for an investor with a high tolerance for risk and a longer investment timeline, which would allow them to regain money if their investments lose value in the short term.

Acorns Aggressive Portfolio

And then, of course, comes the Aggressive portfolio, which is made completely out of stocks. This allocation opens the door for quite a bit of growth, but it also opens the door for a lot of volatility, meaning that your account value can fluctuate wildly from week to week or even day to day. The aggressive portfolio is best for someone who has quite high risk tolerance and who has a long (20+ year) investment timeline.

Once you’ve selected the portfolio that best matches your needs, you can start investing and making money! And Acorns offers four ways for you to start growing your wealth.

Ways to make money with Acorns

If you’re considering signing up for Acorns to manage your investments, then you undoubtedly want to know how you can use the tool to make money. While most investment apps or services have just one way (making lump sum investments/deposits), Acorns offers four ways for you to increase your account balance and begin growing your money.

1. Round-ups help you invest spare change.

When Acorns got started, “round-ups” were the app’s main selling point: It was how you used Acorns to invest. Over time, the additional options below were added, but at its core Acorns was always about the round-ups.

Round-ups work by turning every purchase you make into an opportunity to  invest. Whenever you make a purchase with a debit or credit card linked to your Acorns account, Acorns rounds up to the nearest dollar and sets that money aside. So, for example, if you bought a $0.75 pack of gum, Acorns would round up to $1 by setting $0.25 aside. Once your round-ups reach $5, that money is withdrawn from your bank account and invested in your Acorns portfolio. It sounds complicated, but it’s really simple. The video below will hopefully clarify things in case I butchered the explanation.

The great thing about Acorns is that it’s a sort of “mindless” way to invest. You don’t need to think about investing, you don’t need to consciously do it every day or week or month. It just happens every time you make a purchase. And because it happens in such small increments each time, it is ultimately money that you don’t really miss (unless you use your credit/debit card a lot). But even though you are essentially only investing pocket change, your account will grow slowly and surely over time.

That’s where they get their slogan— “From acorns, might oaks do grow!”

For college students without a lot of money in their budgets to invest, round-ups are a must, and a really easy way to get started seeing some growth before investing more heavily.

2. Recurring investments let you invest on a schedule.

Once you’ve had the round-ups activated for a few months, you’ll eventually realize that, though they’re a great way to mindlessly save and invest, on their own they are not going to be enough to let you hit your investment goals, especially if you’re investing for something big like retirement or buying a house. The good news is, if you decide you want to invest more money, you can—through either a lump sum or recurring investments.

A lump sum investment is exactly what it sounds like: A one-time investment into your account. They’re great when you come into some money (think: tax refund, holiday bonus, or birthday money) and want to put it to work growing for you.

Recurring investments, on the other hand, are a regularly-scheduled deposit into your account. You choose how much you want to invest, when you want to invest (daily, weekly, or monthly), and that’s it. The app will do the rest of the work for you, investing the money for you as scheduled until  you turn off the recurring investment.

Recurring investments are another great way of automating your investments so that you can help your money grow without actively having to think about it. If you have room in your budget, I highly recommend you turn on a recurring investment for whatever you can afford.. Not only will it help you grow your money now, but it will help get you in the mindset of automatic investing which will be helpful  in the future if you land a job that comes with 401k opportunities.

3. Found Money lets you earn money by shopping.

Found Money is the newest way that Acorns is helping its customers grow their money, and it really is as simple as it sounds: You “find” money by shopping with Acorns’ partner (technically, the partner is depositing money into your account after you make a purchase), and you shop directly through the app.

Though when the program first got started it only offered a couple of partners, there are now more than 130 Found Money partners in the program, from AirBnb to Dollar Shave Club, Jet, Nike, Walmart, and more, and Acorns is adding more partners to its network all the time.

Acorns Found Money Portal

The best part is, you’ll know up front what kind of investment you can expect from your purchase: The app spells it out for you. You’ll either receive a percentage of your purchase deposited into your account, or a flat-rate reward (it depends on the retail partner).

And we’re not talking pocket change: Found Money can really add up to big bucks. Walmart, for example, will invest 1% of your purchase into your Acorns account (up to $40 per account per month). Casper (a mattress company) will invest $75 into your account when you make a purchase of $500 or more. Check out this article to learn more about Acorns’ Found Money program.

4. Referring a friend nets each of you $5 (and sometimes has other perks).

Think you’ve got a friend or family member who might like investing with Acorns? Once you’re a member, you get a referral link just like the one that I have, which means that you can invite other people you know to sign up.

If they do sign up, then both you and your friend will havery $5 deposited into your Acorns account, which you can watch grow. Sure, it isn’t a ton of money, but every little bit helps, especially when you’re first getting started.

Need some more incentive to convince your friends to sign up? Sometimes Acorns holds special promotions to help encourage more referrals. A few months ago, for example, they increased their referral reward to $10, and in October 2017 they planted a tree for every new person who signed up through the referral program—a double win for nature lovers. In January 2018, they kicked off the year by offering $1,000 (deposited into your investment account) to anyone who signs up 10 friends through their referral link. That’s a huge referral bonus.

Acorns Referral Bonus

And I suppose it was a successful promotion on their end, because they continued it into February 2018, though the clock reset. Anyone who refers 12 friends (who sign up and make their first deposit between February 1 and February 28) will receive a $1,000 referral bonus deposited into their Acorns account.

Acorns February 2018 $1,000 bonus

March and April 2018 saw Acorns announce another potentially massive referral bonus: $100,000 split evenly between everyone who gets 5 friends to sign up and start investing through Acorns during the month. That means that if 100 people succeed, they each earn $1,000. If 50 people succeed, then they each earn $2,000. And if only 1 person succeeds, well I guess they’d get the whole thing! (But that is an almost impossible outcome.)

Acorns-April-2018-Referral-Bonus

In reality, I expect a couple hundred people to succeed in referring their friends, which would wind up boiling down to a couple hundred dollars in referral bonuses. But it’s definitely an interesting/unique concept for a referral bonus!

How much money can you make with Acorns?

As with any investment, it’s impossible to predict exactly how much money you’ll make by investing through the Acorns investment app. There are just so many variables to take into account: Which portfolio you choose, the assets that make up that portfolio, etc.

That being said, I am currently invested in the Aggressive Acorns portfolio, and I’ve seen a 1-year return of just under 14 percent for 2017. This return will vary by year (2017 was a rockstar year for the stock market, after all). But all in all, not too shabby!

The specific portfolios that Acorns has built have not been around long enough for us to analyze their average 1-year, 5-year, 10-year, or lifetime yields (as we typically get with more established investment portfolios), but I expect that this information will become available as the portfolios age.

Determining your account’s “potential”

To me, one of the coolest features of the Acorns app is the “Potential” tab on the homepage. When you click on this tab, you’ll be presented with a graph that plots out a likely scenario of how your account will grow in value, like the one below that shows my hypothetical balance at the age of 68.

Acorns Investment Potential Graph

The “potential” graph is designed to help you understand why everyone tells you that investing is a long-term game, and how even just a small amount of money invested now could really grow over the years.

It works by taking into account the portfolio that you’re currently enrolled in, your investment timeline, your current balance, and whether or not you have set up a recurring investment. Using that information, it applies historical averages to model what your return could, theoretically, look like. The central line shows what your portfolio would look like with an average yearly return of 6%, the pale inner band shows what your portfolio would look like with an average yearly return between 4% and 8%, and the outer band shows what your portfolio would look like with an average yearly return between 2% and 10%.

It’s pretty cool, and actually a very helpful tool to help you figure out about how much money you should be investing each week/month to hit your goals. By clicking on the “change my future” button, you can see how adding a recurring investment (or increasing your current recurring investment) will affect your account balance in the long run. All in all, it’s an extremely fun and cool tool.

That being said, there is no way to guarantee a specific return on your investments. The potential graph simply shows you what your returns would look like if the market continues to perform as it has averaged in the past. Your returns could ultimately be higher or lower, but should be relatively close to what is projected here.

Grow Magazine

Another really cool feature of the Acorns investment app is that it is designed to teach its users about the basics of investing and personal finance. For that reason, a few years ago the company launched Grow Magazine, an online magazine with the sole purpose of exploring personal finance. Last year, the magazine was tied directly to the Acorns app through a portal offering articles that investors might find particularly helpful.

Acorns Investment App Grow Magazine

In addition to the magazine tab, the Acorns app occasionally incorporates educational messages and lessons directly into the main screens as pop-ups. These messages tend to occur whenever the market is particularly volatile (since that would be when investors see the wildest of swings in the value of their portfolio) and are designed to keep you from panicking.

Acorns Investment App_Lesson Example

All in all, it’s a really smart move on their part, and something that probably helped keep a lot of newbie investors from making big mistakes.

Acorns Later

Okay, so details on this are a little slim, but Acorns just announced that they are going to (finally!) start offering retirement portfolios at some point after the new year in 2018. There have been talks of this for quite some time, so to see it finally come to fruition is AWESOME. The announcement came after news that Acorns had bought Vault, an app that specifically helps people set up and manage retirement accounts.

What is Acorns Later?

The new product is going to be called “Acorns Later,” since it is designed to be, well, for later. Like I said, we don’t yet know what these portfolios are going to look like or what the functionality will be, but more information should be coming soon. You can sign up for the Acorns Later waitlist to get notifications on updates, etc., as Acorns rolls them out. Below are the basics, but you can learn a bit more about Acorns Later and why it’s such a big deal here.

Why am I so excited for retirement portfolio options from Acorns? Well, as someone without access to an employer-sponsored retirement account, I have to manage my own IRA and contributions. This is fine but it’s not ideal; since I already have an Acorns account, I’ve been salivating over the idea of being able to have my personal investments and retirement investments all in one place. It just makes managing my accounts easier.

And, of course, because retirement accounts come with a whole bunch of tax benefits, it just makes sense for me to max those out before turning to personal investments (considering I’m investing for the long term, anyway). It’s almost guaranteed that the new portfolios offered through Acorns Later will be some form of IRA, so that means that we should be able to invest up to $5,500 a year ($6,500 if you’re 50 or older) in these tax-advantaged accounts.

Plus, I just explained all of the awesome ways that you can make money using Acorns (round-ups, recurring investments, Found Money, referrals). Imagine being able to put the power of those strategies towards building up your retirement accounts, too. Retirement may seem like it’s too far away to worry about when you’re inn college, but by starting early you’ll be able to use the power of time to really grow your wealth.

Again, details are slim, but it looks like to opt into Acorns Later you will need to already have an Acorns account. You’ll be charged an additional $1 peer month for access to Acorns Later (bringing your fee to $2 per month).

The Bottom Line

The bottom line here is that I love the Acorns investment app, and I think that all of you will too. Acorns is great for college students and newbie investors because:

  • If you have a valid .edu email address, then your account is free for 4 years from the date that you sign up. This means you have four years to invest and grow your money for free, which is unheard of.
  • After those four years are over, you pay just $1 per month until your account reaches $5,000 in value. After that point, you pay .25%, which is quite low for a managed account.
  • You don’t need to go through the trouble of building a portfolio from scratch. Acorns has 5 fully-diversified portfolios for you to choose from, making it easy to get started and keeping you from getting overwhelmed.
  • You can start investing with as little as $5, meaning you don’t need to have hundreds or thousands of dollars to begin—perfect for college students with tight budgets.
  • The app offers four ways for you to invest: Round-ups, recurring investments/lump sums, Found Money, and referrals.
  • Acorns has its own online magazine called Grow that aims specifically to teach new investors the ropes and help them figure out all things personal finance.

If you’ve been wanting to start investing but don’t know where to start, Acorns is a great place to begin.

About Tim Stobierski

Tim Stobierski is the founding editor of Student Debt Warriors. A freelance writer and editor with a passion for teaching people about all things personal finance, his goal is to help parents and students tackle their student loan problems so that they can live happier, healthier lives. Tim's writing has appeared in a number of publications, including The Huffington Post, The Hartford Courant, Grow Magazine, and others. His first book of poetry, "Chronicles of a Bee Whisperer," was published in 2012 by River Otter Press.

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