finance

Comparing Acorns and Stash: Which is better for Gen Z finances?

By Jack Wilson

The Rise of Micro-Investing Apps

In recent years, financial technology has exploded, creating a range of tools that aim to democratize investing and make it accessible for everyone, particularly the tech-savvy Generation Z. Two of the most popular micro-investing apps, Acorns and Stash, have emerged as frontrunners in this revolution.

These platforms allow users to invest small sums of money effortlessly, an appealing proposition for younger investors with limited capital but a keen interest in growing their wealth.

Acorns: A Simple Approach to Investing

Acorns offers a straightforward way to begin investing by rounding up your everyday purchases to the nearest dollar and investing the change. This 'spare change' investment strategy has garnered popularity due to its simplicity and hands-off nature.

How It Works

• Round-Ups: Users link their credit or debit card to the app. Each purchase made is rounded up to the nearest dollar, and the spare change is automatically invested into a diversified portfolio.
• Recurring Investments: Apart from round-ups, Acorns allows for recurring investments, enabling users to set aside a fixed amount regularly.
• Found Money: Acorns partners with brands that offer cash back when users shop through them, providing additional investment income.

The investment portfolios are composed of ETFs (Exchange-Traded Funds) that are selected based on modern portfolio theory, aligning with users' risk preferences determined at sign-up.

Pros and Cons

Acorns is advantageous for those who prefer a passive investment strategy. Its main benefits include:

• Ease of use: Set-it-and-forget-it model suits busy Gen Z individuals.
• No minimum account balance: Start with any amount.

However, some drawbacks include:

• Monthly fees: While nominal (starting at $1/month), they can be significant relative to small account balances.
• Lack of individual stock investing: Limited to ETF portfolios without option for direct stock purchases.

Stash: Customized Investment with Educational Insights

Stash, in contrast to Acorns, provides a more active approach to investing, allowing users to pick individual stocks and ETFs while also offering educational content tailored to novice investors.

Key Features

• Diverse Investment Options: Users can choose from over 4,000 stocks and ETFs, giving them control over their portfolio composition.
• Auto-Stash: Automate contributions and select automatic investments based on personalized strategies.
• Stash Learn: A rich library of educational resources that cover various personal finance topics tailored for beginner investors.

The app encourages learning through doing, empowering Gen Z users to make informed investment decisions based on comprehensive data provided within the app.

Advantages and Drawbacks

The strengths of Stash lie in its flexibility and educational support:

• Empowerment through choice: Control over specific investments enhances user engagement.
• Valuable learning resources: Access to extensive educational content aids financial literacy.

The downsides may include:

• Higher fees: Stash charges a monthly fee starting at $3, potentially discouraging small investors.
• Complexity for beginners: The plethora of choices might overwhelm inexperienced users initially.

A Practical Mini-Framework for Choosing Between Acorns and Stash

Selecting between Acorns and Stash depends on several factors unique to each user. Here is a simple framework Gen Z investors can follow to make an informed choice:

1. Assess Your Investment Style: Do you prefer a passive investment strategy (Acorns) or active involvement with your choices (Stash)?
2. Consider Your Financial Goals: If you're aiming for automated savings accumulation and minimal management, Acorns could be suitable. For building a personalized portfolio with educational support, consider Stash.
3. Evaluate Fee Structures: Compare the impact of subscription fees on your budget relative to your expected investment size. Smaller balances might favor Acorns due to lower fees, while larger balances could justify Stash's broader features despite higher costs.

The Future of Finance for Gen Z

The introduction of micro-investing apps such as Acorns and Stash signifies a major shift in how younger generations manage their finances. With an emphasis on accessibility and education, these platforms empower Generation Z to take charge of their financial futures with confidence. By understanding each platform's unique offerings and aligning them with personal financial goals and preferences, Gen Z investors can effectively leverage technology for long-term wealth building.