Besides investing with the intention of making a profit for themselves, many individuals are also interested in investing for the purpose of making a profit for their children. According to a July 16, 2020 report, this can now be made much easier with popular micro-savings app, Acorns. The company’s CEO, Noah Kerner, has announced a new feature that will help parents build wealth for their children with minimal investment.
How Does Acorns Early Work?
Kerner stated that the new feature would help parents take $5 and turn it into five figures on behalf of their children. This, he says, will be done with the power of compounding and computing. In an interview with Jim Cramer, he explained how the process would work.
First, Kerner says, the parents will have to commit to contributing regular small amounts of money. If a parent puts aside $5 a day from the day of a child’s birth, the money can add up to $70,000 by the time they are in college. This is based on historical market averages.
Beyond this, Kerner suggests that in the next 50 years, this strategy could compound to $1 million. By the next 65 years, it can climb to $4 million. Needless to say, this investment strategy is based on long-term results.
Acorns is known for its micro-savings apps, which constitutes one of the best online stock brokers for beginners, and this shows in their products roster. Just last month, they launched Acorns Early, which allows parents to invest for their children. As suggested above, this is done through the use of custodial accounts. Once the child in question reaches adulthood, they can take control.
Acorns Continues to Evolve
While Acorns has shown significant interest in educating new investors , the reported data shows some interesting differences in investment habits across generations. It is reported that newer investors are more open to taking risks compared to older ones. This is reflected in the various products offered by Acorns.
The early accounts are fitted with the company’s aggressive portfolio option, which means that it is more exposed to risk. At the same time, there is more exposure to high return potential. This will likely be attractive to parents who wish to maximize opportunities for their children’s investment portfolio.
Acorns, as a company, has been in existence since 2012 and has a recorded membership of over seven million people. Of this number, two in three have opted for automatic recurring investing. This means that they have the option of daily, weekly, and monthly withdrawals from their bank account into their Acorns account.
This, once again, leverages the idea of small and consistent contributions towards greater financial benefits in the long-term. Besides this, exchange-traded funds and diverse portfolios are offered to customers. By Kerner’s account, around 50% of parents in the USA are not saving for their children’s future.
Naturally, this also means that they are also not investing, and the new feature allows them to do so with ease. This means that they are also to take care of both themselves and their family’s financial future in a new way. More importantly, it is actively fostering a casual savings culture.
Acorns Early Aims for Inclusivity in Investments
When most people think of investments, the immediate idea that comes to mind is of very wealthy people managing a portfolio worth millions. This misconception is one of the ways through which ordinary individuals are shut out of the world of investment. However, new fintech regulations are working to make the space more inclusive for all.
Whether it is firms helping the unbanked masses in Brazil or apps like Acorns creating space for new investors, we can expect to see a more inclusive financial landscape moving forward.
Would you open an Acorns account for your child? Do you think the $1 million claim is accurate? Let us know your thoughts below.