The Tip Jar: How I'm using an app to save and invest money

It's helping me set aside a few extra bucks every week.
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Saving is hard when you're on a tight budget, which is why I'm always looking for opportunities to boost the amount I'm squirreling away.

I try to put as much of my paycheck as I can afford – which ranges anywhere between $0–$500 depending on my spending – into my savings account, but recently it's been closer to zero than $500.

Which is why I started looking into apps that would either save me money or help me save, and came across one called Acorns.

Now I'm going to make every effort for this not to sound like an advert for Acorns – it's working well for me so far, but I've only been using it for six weeks and it might not be for everyone.

Nonetheless it's helped me put away an extra $175 on top of my regular saving. Not only is that money being saved, but Acorns invests it for you as well.

Why it works for me

The reason why I like using the app is because it psychologically doesn't feel like I'm sending a lot of money out of my checking account.

Its premise is simple: You link the Acorns app to your checking or credit card accounts (or both), and it saves/invests your spare change for you.

So if I make a purchase for $9.55, Acorns rounds it up to $10 and puts 45 cents into my account. Once your "roundups" reach $5, it gets invested.

You can also set up recurring payments as well as "one-off" payments (I've set up $25 to go into my account every month). And I add an extra $20-$30 from my checking account whenever I feel I can afford it.

Of course, I could always make the same, small payments into my savings on a regular basis, but that would require significantly more effort. I like Acorns because it's all automatic, so I'm saving without thinking about it.

When you set up the app, which you access via a pin number, it asks you questions about your investment needs – taking a profile from you about how much risk you're willing to take on, and using a computer algorithm to invest and manage your money.

What's more the app has a number of commercial partnerships with companies like Macy's, Expedia, Groupon and Hotels.com, and these companies will put a percentage of your purchase into your Acorns account whenever you buy anything through the app.

The downsides

You have to pay a fee, but it's a negligible $1 a month ($12 a year) on balances of less than $5,000, and 0.25 percent of your account balance every year when you have a balance of $5,000 or more.

Nerdwallet notes that this 0.25 percent fee is broadly in line with what other "robo-advisors" charge. Acorns is also free of charge to college students for the first four years with a valid .edu email address.

As your money is being invested, you always run the risk of the investments doing badly and losing some money. And when you want to withdraw money from your account it can take several days, as your investments have to be sold.

It's also not the vehicle for more sophisticated investors who want a broader choice of where they put their money, nor should it be used in lieu of retirement vehicles like IRAs and 401(K)s.

Those interested in a more expansive investing app could consider RobinHood, which charges you $6 a month but allows you to make unlimited stock trades commission-free.

But for millennials struggling to save and who have no interest in managing their investments, Acorns is up your street.

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