While large investment firms struggle to attract millennial clients, start-up apps are learning to engage the large demographic by offering simple ways to invest and save on a micro level. According to a recent Harris Poll study, more than 40% of millennials claim that they don’t invest in the stock market because they don’t feel they have enough money. Apps like Acorns, Stash and Digit are positioning themselves as small-change solutions to an otherwise growing problem. These free-to-download apps offer users innovative ways to kick-start their saving and investing journeys.
Acorns caters to the beginning investor by dumping the spare change from each purchase into an ETF, rejecting the notion that investments should be large amounts of money. Users simply choose one of six risk-level options, and the app takes care of the rest, automatically withdrawing spare change from checking accounts for every $5 spent. Users can also manually enter larger one-time and recurring investments. The app offers interactive charts showing account value, performance and projected value. The projected value chart suggests that choosing a moderately conservative ETF earns $380 in 10 years, while a moderately aggressive portfolio projects a net gain of almost $600 in 10 years. While the platform does not charge commission, users should be wary of the $1/month fee, which is waived for students but represents a fairly large percentage due to the small nature of the investments.
Stash offers a similar platform but with more user control. Capitalizing on the impact investing trend, the app targets millennials looking to invest in the sectors that they are passionate about such as Clean & Green or Social Media Mania. Investors can choose a different ETF for each investment and are encouraged to diversify. Of the 30 investment options, the app makes several recommendations depending on the user’s age, income and desired risk level. What differentiates this app from Acorns is that users must take the time to select specific portfolios and their desired investment amount, and each transaction must be at least $5. To encourage investing, the app employs an interactive tool that demonstrates the power of compounding; the tool suggests that clients with an aggressive portfolio can make $1200 in 10 years with a $10 deposit each month. Stash does not collect a commission but, similar to Acorns, charges investors $1/month with the first three months free.
Digit acts as a virtual thief (one with permission, of course), discreetly taking small sums of money out of users’ checking accounts and depositing it into a savings account. The platform is designed to make saving money hassle-free. Digit is easier than Acorns and Stash to set up, requiring only the user’s name, email, phone number and checking account information. The app works primarily through text messages, so users don’t even need to download an app or check the website to use the platform—no smartphone required. A few times a week the app analyzes user spending and withdraws an appropriate dollar amount, depending on income and spending habits. The app sends users their checking balance via a personalized text that includes a fun message such as “Howdy” or “Namaste.” Users can reply with different commands like “Save” to set up a manual deposit or “Recent” to see completed transactions. Unlike the other apps, Digit does not invest savings but compounds small amounts of money so that users barely notice its absence. The app is completely free, but users do not make a return on funds.
Millennials take comfort in technology, with more than a third of survey respondents saying they’d trust a payment app over an investment bank. These apps encourage young spenders to start saving in simple, automated ways. While this micro approach doesn’t promise to make anyone rich overnight, it’s a great first step for millennials to learn market movements and savings habits, and for the investment industry to target an elusive demographic.