Save and Invest Spare Change without Acorns' Fees

Saving money is hard for most people. A relatively new approach at solving this problem is automatically investing spare change.

The way it works is all your purchases are rounded up to the nearest dollar, and then the difference between the rounded up amount and the actual purchase price is put into an investment account where it can grow. The appeal is that you won't even ever miss the money being saved. Say you buy something for $13.50. It is rounded up to $14, and the $0.50 difference is taken from your account and invested. It's as if you paid that extra fifty cents, which you would have done anyway had the item you bought cost that much more.

It's a great concept, and a neat trick to save some extra cash. The problem, however, is the fees. Acorns, the leading firm in this field of micro investing, charges between $1 and $3 dollars a month, depending on the account you have (college students are supposed to be free). This doesn't sound like a lot, but it could be a rather large percentage of how much one is saving.

For example, suppose all these round ups save you $100 per year. With the $1 monthly fee, you'd be paying 12% for this service and actually saving $88. It's better than nothing, but why pay so much? Why pay anything?

June was a typical month for me. Rounding up all my credit card purchases to the nearest dollar and then taking the difference yielded $6.05. Having to pay Acorns $1 out of that amounts to a 16.5% fee. I'd basically be paying Acorns a dollar to save $5, instead of just saving $6.

If you already track your expenses, you can replicate Acorns' services for free with just a few clicks and key presses at the end of the month in your favorite spreadsheet program. Better yet, you can figure out how much Acorns would have saved for you on a typical month (say $10), and then have that amount automatically taken from your checking account and deposited into a brokerage account by setting up a monthly funding transfer.

Investing the Spare Change

Acorns invests the spare change into a diversified set of low fee ETFs. To replicate this on your own, you need to find a brokerage where you can deposit small amounts and have them buy fractional shares of index ETFs or mutual funds.

Two great options are Fidelity and M1 Finance.


Fidelity is great because it has no minimums or fees to open a regular individual or retirement account. It also offers no transaction fee, no minimum investment amount index mutual funds. For example, you can divide your investment into the Fidelity Zero Total Market Index (FZROX) fund, which tracks the total US stock market and has no fees of any kind, and the Fidelity US Bond Index Fund (FXNAX), which tracks the aggregate US bond market and has an expense ratio of just 0.025%. If you would like international stock exposure, consider the Fidelity Zero International Index (FZILX) fund, which tracks stocks of companies based outside the US and has no fees of any kind. Just decide on your allocation to each fund. If you're not sure, make your age the percentage of your bond holdings and put the rest into the stock fund. For example, if you're 34 years old, put 34% into the bond bund and the rest (66%) into stocks.

In the Fidelity account you can set up automatic transfers from your checking account, then set up automatic investments on a monthly, quarterly, or custom basis, so that the money taken out of your checking account is invested into the mutual funds of your choice.

The one limitation that Fidelity has is that transfers from your checking account to Fidelity must be $10 or more.

M1 Finance

M1 Finance is also great, at least in concept (I haven't used it long enough to have an opinion yet), to replicate an Acorns style spare change investment strategy with no minimums or fees apart from the low ETF expense ratios.

M1's investment style is with something called "pies" that are made up of "slices" of stocks or ETFs. You can construct the pies yourself or choose from the many expert created ones, which consist mostly of low fee Vanguard ETFs. The expert pies are based on different themes, like general investing, investing for retirement, responsible investing, income earning, replicating hedge funds (at least the long portion, I don't think M1 has pies that have short positions), and so on. Each of these themes has a number of different pies to choose from, like "2060 Moderate," which is composed of 16 funds and is intended for someone retiring in 2060 that has a moderate risk tolerance, of "Berkshire Hathaway," which "seeks to replicate Berkshire Hathaway by matching the allocation in the most recent 13F filing. Berkshire Hathaway, run by legendary investor Warren Buffett, is a holding company engaged in many diverse business activities." This pie is composed of 24 stocks (which for some reason doesn't include Berkshire itself).

As with Fidelity, you can set up a recurring transfer from your checking account. Once the money hits your M1 Finance account it is automatically invested in whichever pies you selected. Piece of cake and you're only paying the low ETF fees.

If You Track Your Spending and Would Like to Round Up Monthly

If you use a budgeting program like YNAB, Personal Capital, or Mint, you can export all your transactions in a .csv file (comma separated values). If you don't use a budgeting program to track your spending, you can download your transactions from your bank and credit card providers the same way. The file can be opened with Excel, Google Sheets, LibreOffice, or any other spreadsheet program.

Once you open your transactions file, create a new column called "Round Up." In the first cell below, create the formula "=roundup(xx,0)" where xx is the cell location of the transaction amount in that row. So, if the transaction amount is in cell E2, your formula would be "=roundup(E2,0)". Drag this formula down or double click in the lower right corner of the cell the formula is in to make it propagate down through all the rows.

Next, create a new column called "Difference". In the first cell below, make the formula "=xx-yy" where xx is the location of the round up cell and yy is the location of the transaction amount. So, if the round up cell is in F2 and the transaction data is in E2, your formula would be "=F2-E2". Double click on the lower right corner of this cell or drag it down to have the formula propagate down.

Finally, sum up the difference column for whatever period you want. If you do it for the month, this is the amount Acorns would have saved for you (minus their fee). Transfer this amount to your brokerage and you have Acorns for free.