A new breed of investment house seems to get it: Young people need to know more about saving and investing, and giving them the financial education they crave is not only good for individuals and the economy—it’s good for business.
In August, the financial app company Acorns launched Found Money, a program that plunks dollars into a long-term savings account every time a customer makes a purchase with an Acorns partner. This builds on its core app, which rounds up credit card and debit card purchases to the nearest dollar and invests the difference for long-term goals.
To drive home the value of “micro investing,” Acorns also launched the financial education website Grow, which offers a range of personal financial education. Big banks are on board too. Bank of America Merrill Lynch, for example, has a roundup program called Keep the Change and offers a broad spectrum of financial education through its Better Money Habits.
These firms aren’t just giving lip service to a critical issue. Micro investing, and a financial education program to go with it, can make a big difference. If you save $1 a day and earn 7% a year over 50 years it will grow to more than $160,000. That’s important math because young people have time and they cannot count on the social safety net that older generations have enjoyed.
The new feature from Acorns marries spending with saving so that asset accumulation is occurring relentlessly in the background. Given Americans’ penchant for spending, and their difficulty saving, this approach holds promise.
Millennials love cash-back transactions. Found Money seizes on that affinity by offering “cash forward” for customers that make a purchase with an Acorns partner. For example, if you sign up for the Blue Apron food service you get $30 in your investment account. Other partners include Hotel Tonight and Dollar Shave Club. Coming soon: AirBnB, Lyft and others.
This builds on the company’s round-up app, which now has more than 1 million users and costs just $1 a month for small accounts and .25% of assets each month for larger ones. The money collects in a portfolio of Exchange Traded Funds designed for low costs and long-term growth. Such programs—and the financial education to explain their value—are what young people need to get on the path to long-term security.
Employers beyond the financial industry are coming to understand this too—and introducing financial wellness programs at a brisk pace. It can’t happen fast enough.