We definitely get your concern — but buying dips in the market through dollar cost averaging (what you’re automatically doing) has paid off handsomely for investors for nearly 100 years now. Down markets and the short-term losses that accompany them can be frustrating, but when the market turns around, you’ll have accumulated a diversified portfolio of shares poised to make considerable gains.

I started a free Acorn account during college and used the rounds up for some time. I stopped doing rounds up but instead opted for a monthly deposit of $25. Just this past month I began to be charged $3 a month. I’m wondering with my reoccurring $25 a month deposits and my account valued at $525 is it worth me keeping it open? I do have more expendable income now so I could increase my contributions or is there something that could be a better option?

Not sure this matters but I do have my portfolio set to “Aggressive”

Thanks.

Hey Jean —

That’s super thoughtful of you, and that’s a valid concern about the money being tied up in a 529.

(529 plans tax-advantaged status does make them a great vehicle to save for the little one as the money can grow tax-free until they go to school). If you’re certain you’d like to stay away from those, you do have several options.

Namely:

• Savings bonds — low risk, low reward (annual fixed rate of 0.10% if issued between May and October of this year).
• High-yield savings — low risk, low reward (variable-rate, currently around 0.50% at the most generous establishments).
• CDs — low risk, medium reward (inaccessible during 6 mo-2 year CD period, but much shorter restriction than 529); 0.50%-0.75% for deposits starting at $500+ at most places.
• Brokerage account (like Acorns) — ~ 5-7% based on historical market averages — this depends on your risk appetite and the understanding that the fund you invest in could theoretically lose money in any given year. You’ll also have to pay income taxes on any amount withdrawn since the account would be in your name (before gifting the rest to your little one).

If you’d like to lock in near-guaranteed appreciation, bonds, an online savings account, or CDs offer the safest route.

If you have a moderate appetite for risk, and anticipate holding for several years in the hopes of growing a sizeable nest egg, then a brokerage account through Acorns is an acceptable vehicle for saving. (It automates the investing process in a hands-off way and you can passively watch as your deposits and investment grows over the year). The monthly fee, soon to be $3/mo, is a bit steep when compared to similar brokers, but the ease-of-use of the platform makes it extremely easy to get started/track your investments.

Then you can withdraw when ready, pay taxes, and gift the rest to your family (there is a yearly IRS imposed limit of $15,000 in the 2021 tax year, for perspective).

Hey Steve,

Great question — the answer is, as always, it depends (mostly on your account balance). $3/month is somewhat high if your balance is less than $5,000 (at $5,000, a $3/month fee equates to $36/year — roughly 0.7% of assets under management. Comparable roboadvisers often come in around the .25% range. The fee percentage drops to about .35% as you get closer to $10,000, so the fee structure gets more competitive the higher your blance.

That said, the automated savings component appears to be somewhat attractive, especially if you don’t feel like you would save/invest without it. If that’s the case, it may be worth it to continue on the $3 plan as your balance grows, even if you’re slightly overpaying on fees.

Hey Jillian,

Kudos for thinking ahead re: investing for your future. If graduation is soon on the horizon, it’s important to consider what benefits your future employer will offer. If you think it’s likely you’ll end up in an industry where it’s commonplace for employers to offer benefits packages (that contain some sort of investment vehicle), it will likely be in your best interest to utilize that service. Often, but not always, these are tax-advantaged accounts that may come with a cash match (think Traditional/Roth 401ks, 403bs, state/government-sponsored savings plans).

These, generally speaking, are all better options than a brokerage account that you’d find through a service like Acorns Invest. If you’ve reached your plan contribution limits (there’s a yearly cap on how much you can add to your retirement accounts), then you can get additional market exposure through the app (or apps like it).

That said if your employer doesn’t offer a retirement account/benefits package, then Acorns Later might be of interest to you (it achieves the same end-goal of saving for retirement but through an IRA for a modest $3/mo).

(If you just want to invest in the stock market but not for retirement purposes, Acorns Invest will allow you to buys managed ETF portfolios that closely mirror major indexes).