How the Acorns App Works and Makes Its Money

Saving and investing can be difficult if you're living on a tight budget and a small paycheck. The Acorns app can take some of the pressure off by helping you squirrel away extra pennies while learning some of the basics of sound investing.

Acorns is micro-investing made easy. As part of the process of setting up an Acorns account, the user connects one or more debit and credit cards to the new account. From then on, Acorns will round each purchase to the next dollar and save the change in the Acorns account.

For example, if you buy lunch for $8.75, a coffee later for $3.25 and a sweater for $30.02 after work, Acorns rounds up all of those purchases and credits the user for $1.98 for the day.

The change can then be invested in the user's choice of Acorns portfolios. There are five portfolio choices, each a mix of exchange-traded funds (ETFs) and bonds, and each representing a standard advisor-speak category of investor preference from "conservative" to "aggressive."

Users can set up automatic daily, weekly, or monthly deposits into their Acorns accounts.

Acorns invests the user's money based on portfolio settings. Investments can take one to three days to process. (The timing depends on ETF market hours.)

In addition, Acorns offers a cash-back program called Found Money. Users shop through the Acorns' platform, and instead of receiving a percentage of the purchase back they get a percentage of the money spent at partner stores. Acorns deposits Found Money 30 days after the purchase.

As of February 2019, Acorns has three price levels and, simply enough, they are set at $1, $2, or $3:

• Acorns Core, for $1, is the original service that rounds your purchases to the nearest dollar and invests the proceeds in your choice of portfolios. This version is free to college students.
• Acorns Core + Acorns Later, for $2, adds access to a tax-deductible IRA plan.
• Acorns Core + Acorns Later + Acorns Spend, for $3, is all of the above plus a branded checking account and debit card. Acorns promises zero fees on that account.

The above prices are good, the Acorns site says, on accounts "up to $1 million." This is not likely to happen to a user who is not bulk-buying for Walmart.

Started by a father-and-son entrepreneurial team in 2014, Acorns now boasts more than four million users. Acorns is a private company and makes its money through member fees and, in its early years, through venture capital investors.

In May 2015, just eight months after it launched, Acorns earned $23 million in its third round of funding, bringing its funding total to $32 million. In April 2016, Acorns raised another $30 million in funding to expand its micro-investing products and services.