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The Pros And Cons of ‘Spare Change’ Investment Apps

Spare change investment apps are popular with younger generations who don't have much extra cash to put into investments. But they still might not be for everyone.
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It’s no secret that most people aren’t investing, especially the millennial generation. According to this poll, 40% of millennials feel they don’t have enough money to start investing in the stock market and they believe it takes a lot of money to get started.

On the flip side, finance experts and fintech companies have been trying to demystify investing and expose simpler, low-cost ways to start building your nest egg.

The best robo-advisor options offer low fees and will manage your investments—taking all your guesswork out of the process. There may be some customization available if you choose Wealthfront, like picking and choosing ETFs to add or remove from your portfolio.

Taking it a step further, ‘spare change’ investment apps Acorns will allow you to start investing with just a few dollars (or less).

While these apps cancel out the excuse that you need a ton of money to start buying stocks and investing in the market, they aren’t 100% beneficial for everyone.

Here are some of the pros and cons of using micro-investment spare change apps.

Pro: Low minimum deposit

Since there’s already a notion that you need a ton of money to start investing, spare change apps like Acorns and Stash debunk that myth easily. With Acorns, you can start investing with just $5; with Stash, you can start investing with just one cent.

With the Clink app, you can start investing with as little as $1— the idea is to invest $1 per day.

With these apps, you can easily cut out your morning coffee (or other costly, unneeded expenses) for a few days and round up the money to start investing.

Pro: Low fees for smaller accounts

Another benefit one of the best micro-investing apps is that there are low fees for smaller accounts.

Clink charge one dollar a month for balances under $5,000 and 0.25% annually on balances over $5,000. Acorns charges $1 a month for its basic investment plan, growing to $3 per month if you want to invest in an IRA and access a spare change debit card, or $5 per month to add its custodial investing feature for children, Acorns Early.

This is ideal for beginners who are just getting started with investing. However, once your balance exceeds $5,000, using Stash and Clink becomes less ideal and we’ll explain why in the cons section.

Pro: Simple to use

Apps themselves tend to be user-friendly and these micro investment apps are no exception. You can set up your account in minutes and track the progress of your investments and review your options.

Once you set up your account, you won’t have to worry about picking and trading stocks. The money you invest will be placed into a portfolio of Exchange Traded Funds (ETFs) based on the level of risk you choose.

It’s easy to see your earnings, and some apps can even project your earnings years down the road if you continue to make monthly contributions.

Another huge benefit with apps like Acorns, Stash, and Clink is that they are all automatic. You can set up recurring transfers to your account and invest without even thinking about it.

Acorns allows you to invest spare change using their ‘round up’ system which rounds up all the purchases you make on your debit card to the nearest dollar. With its ESG (Environmental, Social, and Governance) portfolios, Acorns lets you add socially-responsible companies to your portfolio. You’ll be able to build your portfolio with sustainability in mind.

Stash also allows you to invest in companies that support causes you’re interested in like green energy, tech, and more. What’s better, it only takes a second to choose because Stash does all the research and categorizing for you.

Con: You could invest too little

The idea of investing spare change sounds easy and effective, but you also have to consider your personal goals for investing. If you use an app like Acorns and round up $0.30 of spare change for 60 transactions for the month, you’ve only invested $18 or $17 after you account for the monthly fee.

In other words, while your fee is small, it’s taking up 5% of what you contributed for the month.

If you can afford to invest $100/month for example, why not set up a recurring transfer for that amount instead? Especially if you’re looking to retire on your investments one day. Acorns has plenty of other features that might make it worth considering, though, including easy transfers, savings for children, and retirement savings.

Con: High fees for larger accounts

If you start to invest more into spare change apps, you end up paying more money. Sometimes this isn’t worth it in the long run.

As mentioned above, Clink charge a fee of one dollar per month for balances under $5,000—this would be $12 a year fee. But for a balance of $50,000, with a fee of 0.25% annually, that adds up to $125.

Since Acorns provides unlimited investing for $1 a month, it’s a better deal. Acorns also offers cash back in the form of bonus investments when you spend. With 12,000+ partners, you can build your portfolio with your everyday purchases.

As you can see, the more money you have invested, the higher the fee will be with many spare change apps. These apps aren’t really designed to hold exceedingly large investments. You can find better fees elsewhere if you aren’t limited in terms of how much you can invest.

Con: Limited account options

These apps tend to only offer one type of taxable account to investors. Acorn is the exception to this with its Later feature, designed to help you invest in plans like IRAs. With the others, there’s no option to enroll in a tax-deferred account like a Roth IRA. This can limit your options if you have specific long-term investment goals.

Final verdict

‘Spare change’ investment apps clearly have the potential to be useful for beginner investors or even college students who have a limited income and want to avoid complex processes and services.

However, once your account reaches $5,000, you must carefully re-evaluate the pros and cons and to ensure your earnings are not being eaten up by the higher fees.

These micro investing apps are not a good choice for people who prefer to invest in individual stocks, contribute to an IRA, or can afford to invest more than $5,000 in a calendar year.

If you do use spare change apps, be sure to include other tools and accounts in your overall investment strategy. Brokerages like Wealthfront allow you to start investing with low deposits ($500 for Wealthfront) and set up automatic contributions.

Read about our experience in our full review of Wealthfront.

About the author

Choncé Maddox

Choncé is a personal finance freelance writer and Certified Financial Education Instructor. She earned a Bachelor's degree in Journalism and Communications from Northern Illinois University.