Are you looking for a simple and effective way to grow your money? Two popular options that you may have heard of are Acorn Investments and saving accounts.
While both offer ways to increase your wealth, they operate differently and come with their own sets of pros and cons.
In this blog, we’re going to take a look at the advantages and disadvantages as well as the similarities and differences to help you decide which option is the right choice for you.
So if you’ve been considering trying to grow your money instead of letting it sit in that bank account, keep reading, and hopefully, we can help you in your decision-making process of how to best begin the process of accruing more wealth.
What are the Similarities?
Acorn Investments in savings accounts may seem like completely different financial tools, but they share a few similarities.
For starters, both options allow you to grow your money over time. With the savings account, your money earns a small amount of interest that compounds over time.
Similarly, Acorn Investments can also generate returns over time as your investment grows and the value of the underlying assets increases. Along with this, some other similarities include:
- Both offer a certain degree of security. Savings accounts are FDIC-insured, and Acorn Investments are backed by Securities Investment Protection Corporation (SIPC).
- Also, both are relatively easy to set up and manage.
What are the Differences?
While Acorn Investments and saving accounts may share some similarities, there are also some very significant differences between the two.
Maybe the biggest difference is the potential for returns. While savings accounts offer a guaranteed return in the form of interest, the rate is often quite low and may not even keep up with inflation.
On the other hand, Acorn Investments offer the potential for much higher returns but also come with higher risks. Some more key differences include the following:
- The level of involvement required differs. With the same account, you simply deposit your money and let it sit there to earn interest. Acorn investments, though, require a bit more involvement.
While the investment management is done for you, you’ll still need to choose your investment royal and monitor it regularly to ensure that it’s in alliance with your financial goals.
- The liquidity of the accounts varies. With the savings account, you can draw your money anytime without penalty. On the other hand, Acorn Investments may come with restrictions on when and how you can withdraw your money.
- The fees associated with each of these accounts may vary. Saving accounts typically have very low fees, if any. Acorn investments often come with management fees, trading fees, and other expenses that can eat into returns over time.
Pros and Cons: Acorn Investment vs. Savings Account
Choosing between Acorn Investments and savings accounts depends on your financial goals and risk tolerance. At the same time, savings accounts provide a safe and stable option for those looking for a guaranteed return on their investment.
Acorn Investments may be a better fit for those willing to take on more risk in exchange for potentially higher returns.
Understanding the advantages and disadvantages is key in this situation, and that’s why a pros and cons list is such a useful tool. For example, here is one for the two types of accounts:
- Potential for higher returns
- Able to diversify the investment portfolio
- The low minimum investment required
- Easy to set up and manage
- Risk of losing money due to fluctuations in the market
- No guarantee of returns
- Limited liquidity
- Fees associated with management, trading, and other expenses
- Guaranteed return on investment
- FDIC insured
- Easy to set up and manage
- High liquidity
- Low-interest rates
- Limited potential for growth and returns
- Interest earnings are taxable
- This may be subject to account maintenance fees or other charges
Which One is Easier to Manage?
When it comes to ease of management, savings accounts and Acorn Investments offer different experiences. Saving accounts are generally very easy to manage, with minimal involvement required on your part.
You simply deposit your money and let it sit there, earning interest. On the other end, Acorn Investments requires a bit more involvement on your part.
While the investment management is done for you, use your investment portfolio and monitor regularly to ensure that it aligns with your financial goals.
Ultimately the decision of which option your manager is will depend on your level of financial literacy and comfort with managing investments. But boiling it all down, savings accounts are the easier of the two to manage.
Which One is More Common?
So which one is more common? In this battle, savings accounts are the clear winner. Savings accounts are a staple of personal finance, offered by virtually every bank and credit union in the country.
They are a popular choice for those looking to save money for short-term goals or build an emergency fund and are often used as a safe haven for funds that may be needed soon.
Acorn investments are a relatively new investing option that has gained popularity in recent years. However, while they are becoming increasingly common, they still have a way to go before they catch up to the popularity of savings accounts.
Final Thoughts on Acorn Investments Vs. Savings Account
So, in the end, the decision of which option to choose should be based on your personal financial situation and goals.
If you’re not sure which option is right for you, it’s always a good idea to speak with a financial advisor who can help you make an informed decision. We hope the information we’ve given in this blog has helped you just a little, though.