And I understand why that is.
Between self-defeating thoughts and a lack of understanding of the available saving tools, many conclude as to whether or not to save, "Why Bother"?
For a while, I was skeptical of saving using automated tools or anything that I perceived took "control" away from my investing. I thought, why trust some random company when I could do the same myself with possibly more success? Well, I finally had the incentive one day when a company called Acorns offered me a cool $5 to open an account with them. I know I know, not life-changing, but for those of you who have read why small savings add up over time will appreciate the small boost. If you end up pursuing an Acorns account, feel free to click through any of the links below if you want to share rewards of $5 each!
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Who is the Millennial CPA? Check my About Me to find out!
Whether we want to admit it or not, investing can be emotionally difficult for many people, and their fear often keeps them out of the stock market (and its resulting year-over-year gains) entirely. Robo-Advisors help with this by removing the emotion from investing, and getting your cash working hard for you in a portfolio of your choosing. Get started with this very good introduction to Robo-Advisors and their benefits, and even more key learning on the subjects below:
- What's a Portolio? (Hint: It's your financial assets considered as a whole.)
- Introduction to Indexing (Boglehead's edition)
- The Benefits of Robo-Advisors (Nerd's Edition!)
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But where to start in selecting a Robo-advisor that works best for you? Instead of me claiming I've reviewed them all in-depth (time-waster for us both, am I right?) I'd rather send you to an authority on the options, such as Nerdwallet's August 2019 comparision. Where you park your money has to be about your financial goals, affordable fees, and overall comfort with the platform, and there is no one-sized-fits all solution to that.
After doing my due diligence (sometimes abbreviated "DD" in the investing word) on the many options out there, I decided to try out Acorns, an app that checks all the boxes above and more. With an affordable monthly fee of just $1 per month, you pay for Acorns to manage your portfolio in the style you want:
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By selecting "High-growth Potential", I am selecting for an aggressive investing option, which will invest me in a riskier portfolio with the potential for higher rewards. "High Risk, High Reward" is the opposite of "Low Risk, Low Reward' - if you seek a more conservative portfolio, there will be less risk in your investments, and a lower percentage of return over time as well.
Where you park your money has to be about your financial goals, affordable fees, and overall comfort with the platform, and there is no one-sized-fits all solution to that.
As you can see, if you plan to keep your savings in there for a long time (And you should!! Compound savings are a miracle.) then it makes sense to select for a more aggressive option. The market returns an average of 7% over time, for more discussion of the 7% rule and where it's from, please refer to the abundantly useful resource on all things saving and early retirement Mr. Money Moustache! Also see below for some of my favorite written resources on compound interest, dividend returns, and all things money growth over time.
Basically, the TL;DR of everything above is just that money invested grows over time faster than money not invested. You may have heard the phrase "Time in the Market is better than Timing the Market". This practice is advocated for by investors from Warren Buffet to Benjamin Graham. (See some of my Beginner's Investing Resources below for more on this!) This simple concept means that if you currently keep all your savings in cash, you are actually losing money. Hard to believe, but the market is designed to help you beat the average historical inflation that your money needs to equal or beat in order to grow over time.
Wild, isn't it?
Those of you who have read up on portfolio growth over time then understand the advantages of consistently investing, either day by day, week by week, or month by month - Acorns makes all of these options possible.
Check out a motivational chart below which illustrate the benefit of my current contribution plan to Acorns, which is $20 a week for 52 weeks every year, beginning right now at my current age of 31:
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That's right. By simply letting Acorns remove $20 from my checking account weekly (plus an estimates $30 of Roundups per month) and invest into my High-Growth account, I can expect to have six figures waiting for me by the time I've reached retirement age. If at any point, I want to withdraw along the way, that would also be an option as this is a taxable account with no negative tax consequences associated with retirement accounts like 401K's and IRA's. Learn more about what I mean in the difference between "Taxable" and "Non-Taxable Accounts" below:
Regardless of your preference of taxable or non-taxable account options, I will say that Acorns in fact offers both:
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"Acorns Core" refers to a taxable brokerage account, which means one you can withdraw from before retirement age.
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"Acorns Later" refers to a NON-TAXABLE brokerage account, which means one you can generally withdraw from at or after retirement age. Please note, this option does cost $2 and not $1 per month. If you do some quick math, you may still see that it's worth it:
When it comes to an Acorns Taxable Brokerage account, you will see that keeping $1,000 costs you a market-comparable 1.2% per year, and as you increase that number, you begin to beat the typical market cost of Investment Advisory drastically.
Especially if you're familiar with rates in the investment industry. you can see what a good deal the management fees of the Acorn brokerage account truly are compared to industry averages. Of course, these industry-average smashing management fees begin when you start keeping a balance of approximately $1,000 in Acorns - but everyone has to start somewhere, right?
By selecting either option above, you'll be contributing $5 to each of our accounts for the future, on Acorn's tab. Pretty sweet way to start investing, right?
Happy investing, and if you enjoyed any of the info Millennial CPA has to offer, be sure to check some of my key investing resources below!
Beginner's Investing Resources
There's no substitute for some good old-fashioned reading to learn more about a topic of interest. Readers and self-educators out there, check out some of The Millennial CPA's recommendations for where to get started with investing (disclosures on linking here):
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