Post may include affiliate links. We may earn a fee if you use them at no cost to you. Disclosure.
Ad for Acorns
With all the uncertainties in the world, more parents and families are looking for ways to give their children a head-start to adulthood by investing money for their future. While one traditional method is through a college savings account – 529 – or trusts, Acorns Early offers an UGMA/UTMA option for your kids while they are still minors.
Acorns is a well-known 0-to-1 financial wellness system used by millions of people for managing their investments with as little as spare change. The Acorns Early program is another feature rolled out to the public. This automated system allows parents, family, guardians, and friends to set up investments dedicated to a child’s future in less than three minutes. Find out all the details with this Acorns Early Review.
What is Acorns Early?
Most people know Acorns’ different services, including retirement plans (Later), investment (Invest), and checking (Acorns Checking), that automatically allow the user to invest spare change.
Acorns Early is an investing account specifically designed to allow adults to invest money for children in the child’s name.
One advantage of using Acorns Early versus a 529 college account is the money is not only for a college fund. The custodian can use the money for anything that benefits the child.
How Does Acorns Early Work?
Acorns Early is part of the Acorns Family plan, which has several different finance accounts that focus on various financial solutions.
Acorns Invest allows users to invest in stocks, even with as little as spare change. Then Acorns Later is a valid retirement account, which makes it easy to save and invest for your future. Finally, Acorns Checking has the benefit and function of a checking account with a debit card.
And Acorns Early makes it possible for a parent, guardian, or other adult family member to set up a custodial account in the name of the minor child.
This financial account allows the custodian to deposit money into an account and invest in a portfolio of ETF’s (or Exchange Traded Funds). And then, once the minor account holder reaches the age of majority, the account will transfer into the beneficiary’s name.
Acorns Early allows for setting up and automating your funding and investments and can rebalance the portfolio over time to meet the changing risk tolerance.
What Type of Account is Acorns Early?
Acorns Early is a UTMA/UGMA that allows an adult – a parent or relative – to set up an investment account in the name of a minor. UTMA stands for the Uniform Transfers to Minors Act, while UGMA is the Uniform Gifts to Minors Act.
Under UTMA/UGMA regulations, the adult custodian manages the investment account while the account holder is underage. The adult (or custodian) has control of the account until the child reaches the age of majority.
Then once the child reaches majority age in their state of residence, they gain full control of the account and can use the funds for anything they like. These accounts eliminate the need to establish a trust.
Cost of Acorns Early
You can get a monthly Acorns Family plan for $5 a month, including Acorns Early and Acorns Later, checking, and investment accounts.
There is no option to pay for only an Acorns Early account. You can only get Acorns Early with the Family plan. And the family plan only comes at the $5 monthly price.
Benefits of Acorns Early
There are several benefits of enrolling children in an Acorns Early account. For instance, Early accounts are invested in a selected portfolio of ETFs (or Exchange Traded Funds).
And children’s accounts automatically enroll as aggressive ETF-based portfolios.
Acorns Investments for Your Kids Calculator
Acorns Grow also has a useful calculator that can help you estimate the necessary amount of money you may need to save to meet your goal.
First, pick the beginning age of your child – from birth, 5, 10, or 15. Then, choose how much you want to invest as a daily contribution.
The calculator will then show you a hypothetical graph illustrating your child’s potential future balance, with different colors showing your returns and investments. (Please note, the results portrayed are hypothetical illustrations only and do not represent the performance of any Acorns portfolio, nor do they account for economic or market factors which can impact performance)
Acorns Financial Investing Educational Resources
When you have an Acorns Early/Acorns Family plan, the guardian – and the minor named on the account – get access to a massive financial literacy library called Grow.
Grow provides valuable resources on money management, investing, taxes, loans, current events, and other useful financial topics.
Cons of Acorns Early?
Acorns Early is classified as an UTMA/UGMA account, which could affect a child’s eligibility for financial aid.
UTMA/UGMA accounts are assets that you must report on the FAFSA (Free Application for Federal Student Aid). You can expect to see as much as a 20% asset value loss.
You also don’t get the same tax benefits from an Acorns Early account as you would a 529. Annually, you can put in up to $15,000 ($30,000 for married) without paying a gift tax. There won’t be any tax on the first $1,100 in children’s unearned income tax. While the second $1,100 has a child tax rate. Everything over that gets taxed based on the parent’s income.
But if you want to invest money for children that can be used for purposes other than education, the Acorns Early account may give you an advantage over a college fund. An Acorns Early account might also be easier to establish than the hassles of setting up a trust.
What Else Can Acorns Do?
Acorns offers various financial tools and products to help people manage their finances, from investing to retirement to banking.
Acorns selects an IRA account based on a questionnaire completed by the user. The IRA portfolio is selected based on a number of factors, including the user’s age and time horizon to retirement age.
Acorns Checking is a fully-digital banking account that allows you to use Round-Ups® to round up your spare change from every purchase and invest those funds with Acorns Invest. You also get a dedicated debit card.
Acorns Invest is a micro-investing tool you can set up in under five minutes. You can set automatic recurring investments or use spare change from your purchases.
Then there’s Acorns Earn, which is a way to get rebate investments on purchases from online stores of registered brands.
Bottom Line: Who Acorns Early is Best For?
If you are the parent, guardian, family member, or family friend of a child and you’re looking for how to invest money for their future, then Acorns Early could be for you. Here’s why – Acorns Early lets you invest money for a minor by automatic withdrawals or by rounding up your spare change.
And since Acorns Early is a UGMA/UTMA classification, the money can go for anything that benefits the child – not just education expenses.
Frequently Asked Questions about Acorns Early
Despite our in-depth Acorns Early review, many people still have plenty of unanswered questions about using Acorns Early. That’s why we included this frequently asked questions section.
Is Acorns Early insured?
Acorns Early is an UGMA/UTMA investment account. As with any investment, it’s a risky venture that isn’t insured.
Is Acorns Early a Good Investment?
Acorns have earned a reputation for being an easy way for average people to afford investing and saving money. And Acorns Early makes it possible to invest money for children that they can use for expenses other than education.
However, as with any investment, there are risks involved since your portfolio consists of highly aggressive investments in ETFs.
How Do You Sign Up for Acorns Early?
Signing up for an Acorns Early account is simple and fast and doesn’t require much information. But, first, you must sign up for an Acorns Family account and choose the $5 monthly plan.
After enrolling in the family plan, search the Acorns.com page for the Early tab. Then click on the “Add a Child” button. Next, you’ll have to add the child’s legal name, date of birth, and social security number.
The UTMA/UGMA account is transferred to the child once they reach the age of majority and they become the sole owner. At which point, they may use the funds however they would like.
How is Acorns Early Different from a 529 Account?
One of the biggest differences between Acorns Early and a 529 account is that a 529 can only be used to pay for educational needs – if it’s used for anything else, there are penalties. On the other hand, money in an Acorns Early account can be used for anything without penalty. For more information about the differences between these accounts, read this post!
So what’s the verdict about Acorns Early?
Overall, Acorns Early is an investment option for those looking to invest money in their children’s future. The account is easy to set up and doesn’t require much information. Plus, there are no fees associated with the account as long as you sign up for the $5 monthly plan. And your child can use the money invested in their account for anything they want once they come of age.
If you’re looking for an easy to set up and use investment account that can help you contribute money for your child’s future or just want to add another investment account to your child’s portfolio, Acorns Early is a great option to consider.
Investing involves risk including the loss of principal. Please consider your objectives, risk tolerance, and Acorns’ fees before investing. Investment advisory services offered by Acorns Advisers, LLC (“Acorns”), an SEC-registered investment advisor. Brokerage services are provided to clients of Acorns by Acorns Securities, LLC, an SEC-registered broker-dealer and member FINRA/SIPC. For more information visit Acorns.com.
Round-Ups® are transferred from your linked funding source (checking account) to your Acorns Invest account, where the funds are invested into a portfolio of selected ETFs. If you do not maintain an adequate amount of funds in your funding source sufficient to cover your Round-Ups® investment, you could incur overdraft fees with your financial institution. Only purchases made with Round-Up accounts linked to your Acorns account with the feature activated are eligible for the Round- Ups® feature. Round-Up investments from your funding source will be processed when your Pending Round-Ups® reach or exceed $5.
Acorns Checking Real-Time Round-Ups™ invests small amounts of money from purchases made using an Acorns Checking account into the client’s Acorns Investment account. Requires both an active Acorns Checking account and an Acorns Investment account in good standing. Real-Time Round-Ups® accrue instantly for investment during the next trading window.
A properly suggested portfolio recommendation is dependent upon current and accurate financial and risk profiles. Clients who have experienced changes to their goals, financial circumstances or investment objectives, or who wish to modify their portfolio recommendation, should promptly update their information in the Acorns app or through the website.
Acorns Earn provides subscribers access to shop with our partners and earn bonus investments into your Acorns Invest portfolios when purchasing items from the partner brands. Acorns Earn rewards investments are made by Acorns Grow, Incorporated into your Acorns Invest account through a partnership Acorns Grow maintains with each Acorns Earn partner.
Acorns Subscription Fees are assessed based on the tier of services in which you are enrolled. Acorns does not charge transactional fees, commissions or fees based on assets for accounts under $1 million.
Acorns is not a bank. Acorns Pay, LLC offers an Acorns Checking deposit account, FDIC insured up to $250,000. Banking services are provided by Lincoln Savings Bank or nbkc bank, Members FDIC. Acorns Visa™ debit cards and banking services are issued by Lincoln Savings Bank or nbkc bank. Please see your Acorns Subscription Center or Account Statements for a description of the fees you pay to Acorns for its services.
The ETFs comprising the portfolios charge fees and expenses that will reduce a client’s return. Investors should consider the investment objectives, risks, charges and expenses of the funds carefully before investing. Investment policies, management fees and other information can be found in the individual ETF’s prospectus. Please read each prospectus carefully before investing.
Acorns, Round-Ups®, Real-Time Round-Ups™, Invest the Change and the Acorns logo are registered trademarks of Acorns Grow Incorporated. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.
Hypothetical illustrations were presented for informational purposes only and meant to show the potential impact of long-term investing and compound returns. They do not predict the investment performance of any security or index. Such results do not represent the performance of any Acorns portfolio and do not take into consideration economic or market factors which can impact performance. Actual clients will achieve investment results materially different from those portrayed.
For additional important risks, disclosures, and information, please visit https://www.acorns.com/terms/