Ever come home after shopping and pull out a pocket full of change? What do you do with that change? Maybe you put it in a drawer for years to come. Maybe you just put it back in your pocket to use later. Most of us don’t have a plan for this change and change can add up!
The most effective way to invest physical change is to have a place that all change is stored and then have it exchanged to cash for investment. A more effective way to invest change is to not take possession of change and instead take advantage of round-ups from purchases and have that change invested automatically.
I’d like to change how you look at change. I want to show you just how much change can add up over time and then give you some practical ideas to consider. By the end of this, you will know how to invest change and how much it can really add up.
How much can change add up?
Have you ever considered how much change could add up if you just saved it? It adds up to quite a bit. The most common way to doing this, of course, is to use some sort of piggy bank. I have a big plastic bowling pin that I won at a bowling alley.
You put your change into until it’s full and then you have quite a bit at the end of the year.
One year I did this and had $108 at the end of the year that I used for all of my food expenses when my wife and I drove from California to Virginia which is across the entire United States! Not bad right?
What if you saved that money more than a year though? It would add up pretty quick. If you saved $108 the first year and another $108 for 4 more years, that’d be $540. That’s with no interest!
How Does Interest “Change” This? (pun…heehee)
Interest makes a big impact and that impact gets bigger each and every year that follows. That’s because interest is applied each year to the previous balance so the first year in our example, $108, let’s say there was 5% interest, it’d be worth $113.4. ($5.40 from interest)
Now the next year, you make another $108. So $113.4 + $108 = $221.4, then add in the 5% interest. That’s $232.47 ($11.07 in interest which is more than double the interest last year because it’s compounded.) You can see how this adds up.
In fact, I took the liberty of plugging into a convenient chart for all of you visual learners out there!
Hopefully, this helps you visualize compound interest a little easier. I pulled this data from investor.com in case you want to plug with your own numbers. In case you were curious, doing this out to ten years would end up being $1394.93.
Wow! Well, obviously you can’t make this interest if it’s sitting in your couch cushions. It needs to be in some sort of savings account or investment account. This can be a regular bank account, a stock account, or any other type of investment account.
Acorns Allows You To Invest Change Easily
Have you heard of?Acorns? Acorns is one of the best investing apps for investing your spare change when you make purchases with your debit card or credit card. You go to the supermarket and spend $32.54. Your change would be $.46. What Acorns does is rounds your purchase to the nearest dollar and takes that change and invests it into an account for you. You can use this to save up for a purchase you want or leave it invested for years to come.
The longer it is invested, the more time compound interest will have to increase its value.
Acorns is an awesome app because not only is your money being saved, but its being invested in an investment portfolio that you choose based on your risk tolerance. Instead of the money just sitting in your checking account and getting spent, it’s separated into Acorns so it’s out of your mind and can get started working for you!
You can choose from an investment portfolio that is conservative, moderate, or aggressive. The asset allocation is made up of Exchange Traded Funds that are completely dependent on your risk tolerance and you can change it any time as your investment goals change.
If you are investing for a short-term goal, a more conservative portfolio is probably wise. If you are going to allow it to grow for 5 or more years, choosing a more aggressive portfolio will yield much more on average based on past market performance.
If you decide to invest more than your spare change, you can deposit extra cash at any time or set up an automatic deposit so that every week, two weeks, or month a deposit of your choice is invested.
Does Acorns Have a Minimum Balance To Get Started?
Acorns doesn’t require any money to open an account but in order to start investing, you must obviously have some money. You can either deposit $5 or setup roundup investments to get started investing.
How Much Does Acorns Cost?
The good news is that Acorns costs only $1 per month. They offer a $3 per month service that allows you to set up a retirement savings account and bank account as well but these aren’t necessary if you just want a place to invest small change on a regular basis.
$1 per month may seem like a waste of money when you only have $50 invested but the value increases incredibly as time goes on because it’s always $1 per month for your account until you reach $1 million dollars! That’s practically nothing.
Also, Acorns has a program called “Found Money” where if you make qualified purchases through one of their partners, they just deposit extra money in your account.
I never pay for Acorns because they give me $1 of Found Money every time I go to Sam’s Club (a Found Money Partner) to buy groceries and I do that at least twice a month. I get to basically use Acorns for free.
Why Acorns is one of my favorite investing apps
What I do is I have it set up to round up every purchase I make and put the change in my account. Then I also have it set up to save $5 each week. That’s it and I usually invest about $90/month without even thinking about it.
Along with the fact that I don’t even pay for the service because of the Found Money contributions, Acorns makes investing change easy. It allows me to invest in the Stock Market with just the leftover change from my routine purchases.
Every time,? I check my balance, it’s always a little surprise. It’s amazing how much a little micro-investing adds up. Check out my account as of today:
In case you’re wondering, the two cliff-like drops in value are my withdrawals. Once to lay grass in my backyard and the other for a planned trip I took with my family.
When you want to cash out, the money goes straight back into your bank account.
Hopefully, this inspired you to start investing your change! This full Acorns Review will provide you with everything you need to know about Acorns. Feel free to read through it. If you prefer to just see the Acorns website, the link is provided below.
Eric Baglio has been investing for over ten years and learned a lot of valuable lessons along the way. He has helped numerous people start investing on their own and founded Let’s Start Investing to help anyone willing to learn how to build wealth. His favorite brokerage is Webull and his favorite stock advising service is Motley Fool Stock Advisor.