Acorns: Investing pennies at a time with your smartphone


WASHINGTON, September 3, 2014 — With expensive college tuition and a bleak unemployment rate looming after graduation, the typical person under 30 does not have substantial financial wiggle room. So, naturally, in millennial eyes, investing seems like an overly risky venture. “Millennials have kind of a cash-under-the-mattress thinking about saving,” said Emily Pachuta, who led a study at UBS that researched how millennials invest. “They feel anxious and fearful of the market.”

The reluctance of millennials to invest is caused in part by high unemployment, lofty college costs, and unpaid “internships.” Millennials have less financial flexibility than the previous generation that helped launch a period of active investing in the mid-20th century when the economy was in higher spirits. Millennials simply do not have the financial freedom to do the same. A new start-up and app called Acorns seeks to address this situation.

An Appeal to Millennial Investors

A sensible strategy proposed to young investors is to round each of their payments to the next dollar and put the difference into a savings account. However, it’s very difficult to make anything of value with this tactic, as interest rates are very low and the younger generation is not spending lavishly enough to make it worthwhile.

The Acorns app allows users to link to their debit or credit cards and round up on purchases. Acorns then invests the extra amount, offering users the choice among five portfolios ranging in aggressiveness. For Acorns’ $1-per-month tier, practically anyone can invest. It’s especially appealing to under-30 investors who have all the resources imaginable along with savvy Internet and research skills, but simply not enough spare money to invest.

As a millennial myself, I find Acorns’ approach to be a breath of fresh air. I spent a number of years working for Empire CAT, and while I was paid fairly, the cost of living was still prohibitive when it came to making any real attempt at investing. What became clear was that I still managed to use my credit card about a dozen times every week. The thought of investing a few pennies each time is an attractive one.

An Introduction to the Bigger World of Investing

Although Acorns can certainly result in lucrative returns for some users, the app is designed to provide more of an introductory experience for new or low-risk investors. “There are 315,000 financial advisers out there. We’re not trying to compete with them,” said Acorns CEO Walter Cruttenden. “We’re trying to be the starter account, the farm school, the incubator.”

Of the 10,000+ users who beta tested Acorns, 85% of them were under the age of 35, which is just the type of demographic Acorns is seeking to appeal to. “We’re really excited to be engaging this young group,” said Walter’s son and Acorns COO, Jeff Cruttenden, who is also a millennial.

Acorns aims to be very accessible, with options that appeal with regard to their simplicity and appropriate risk allocation. Users can provide basic details – like their yearly income and net worth – to determine which investment plans and goals are suitable for them. With this, Acorns is teaching some investors about money and investment management. “There’s not a place to put in a stock symbol or a price or type of order,” says Walter. “It just sweeps your money into this pre-constructed portfolio, and when you want it, you withdraw instantly.”

Acorns’ Beginnings and Possible Future

The concept of Acorns came to life during Jeff’s senior year at Lewis & Clark College, where he and his father spoke routinely about how technology would impact the future of trading. Specifically, they kept coming back to how technology’s significant reduction of investing fees would result in attractive cost reductions that would appeal to micro-investors. From that point on, the Cruttendens worked on what would become Acorns: their investing answer for mobile-first and research-savvy millennials who are wary of traditional investing.

Walter has plenty of financial experience as the founder of investment banking firm Cruttenden Roth, now Roth Capital, in addition to launching the investment banking section of E*Trade. His experience and his son’s resourcefulness resulted in Acorns, which is now becoming a highly buzzed-about topic in investing circles.

In fact, Acorns has earned the nickname the “Tinder of investing,” which references apps like Tinder and Uber that make various everyday activities like dating or getting a car ride easier than ever before. This accessibility and simplicity, with rewarding returns, is precisely what Acorns aims to do with the topic of investing among the millennial demographic and beyond.

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