Spare Change Investment Apps

Have you ever noticed ads for investment apps on social media sites like Youtube or Snapchat sponsored by celebrities like Ashton Kutcher, explaining how your purchases will be rounded up to the nearest dollar and that spare change will be invested? If you have, you came across a spare change investment app and may not know what that means. These apps are specifically designed for millennials because developers realized there was a lack of investing in this group and saw an opportunity. According to a Harris Poll conducted in 2016, 79% of millennials are not currently investing in the stock market. This is where these spare change investment apps become the solution; the three top apps for this is Acorns, Stash, and Clink. When looking into these apps you need to be aware of the benefits and drawbacks associated with this type of investing.

How does the app work?

You first need to create and set up your account, once this is done then the money that you choose to invest will be placed into a portfolio of ETFs (Exchange Traded Funds) based on the level of risk you chose for your account.

What are some of the benefits?

There are numerous benefits to choosing an investment app like this. These apps are easy to navigate, require a very small minimum deposit to start investing, and don't have huge fees associated with your account.

Easy to navigate: Apps like these are very user-friendly and require only minutes to set up your account. Once set up, they allow you to easily be able to track your progress and review/change your investment choices. Once your account is set up it is easy to see how much you've earned and depending on the app you chose, they will even give you projections on earnings. You also have automatic options that take the stress and worry out of these apps. You can opt-in for recurring transfers from your account every paycheck, so you steadily increase how much you're investing.

Very small minimum deposit: With Acorns or Stash, you can start investing with just $5 and even less for Clink! Clink requires an even smaller minimum of $1.

Low fees for your account: For these apps, there is a small monthly fee of only $1 if your account is under $5000. This benefit is great if your account is less than $5000 but can be problematic if your portfolio exceeds that amount.

What are some drawbacks?

While these apps have many benefits they also have equally as many drawbacks. Issues like higher fees for accounts over $5000, investing too little, and limited account options are something that you, the consumer, need to be aware of.

Higher fees for larger accounts: As you saw in the benefits section, there are low fees associated with your account only if your account is below $5000. Once your account surpasses that $5000 mark you may need to reconsider these investment apps and look into something meant for higher investments. Once you start investing more in spare change apps, you will end up spending more money in the long run. These apps aren’t really designed to hold exceedingly large investments.

Investing too little: On the flip side, if you are not investing enough money, that can be problematic as well. Investing spare change is a nice idea, but you need to be aware of your goals as to why you're investing. If each month you're only investing $20, then your monthly fee is taking up a decent percentage of your contributions. If your goal is to have enough money for a car, or towards your retirement fund, then this is just not practical to achieve that goal.

Limited account options: Unfortunately, apps like these usually only offer one type of taxable account to investors. There are no options to enroll in tax-deferred accounts like a Roth IRA, or a 401(k) account.

Overall, when looking at spare change investment apps, these are primarily good for people who can't afford to put in a significant amount of money towards conventional investing but want to start. This is a good app to use if you're a beginner and have a relatively small account (under $5000), however, once you surpass that and have a larger account it may be time to look into other investment opportunities.