Millennials are changing the investing landscape. Those born between 1979 and 1999, who have become known as the Millennial Generation, are taking advantage of social media and crowd-funded applications to invest in unusual investment vehicles. While brokers and traditional investment tools are still extremely relevant, their prevalence with millennials is slowly fading. Instead, social media, mobile apps and digital financial planners have replaced brokers, wealth managers and advisors for much of the younger population.
Not only are these applications attracting Millennials to their services; they’re actually getting them interested in investing. The younger generation is flocking to services that value transparency, ease-of-use and quicker gratification. While these digital services may not be the smartest way to invest and manage money, they definitely are innovative. Here are just of a few of the applications millennials are using to manage their money.
Founded by father and son team Jeff and Walter Cruttenden in 2012, Acorns is an app that allows its users to round up their daily purchases and automatically invest the change into a diversified portfolio. Comprised of index funds offered by the world’s top asset managers and completely commission-free, Acorns is an great investment tool for those who frequently use credit cards or make online transactions.
Acorns works by monitoring your bank account and automatically investing the spare change from your daily purchases. If you were to make a purchase with your Bank of America card for a $3.75, then $.25 cents would be deposited into you Acorns account. Acorns lets users choose between five different portfolios on a scale of conservative to aggressive risk. There are many other features to Acorns’ service, like the ability to make deposits ranging from $5 to $50,000 or the ability to make daily, monthly or yearly deposits. The main advantage to Acorns is its simplicity: it requires very little attention to the app itself. While it may offer well-below average returns, a savvy millennial may use it due to the fact that it takes up very little time, and if nothing else it helps save money.
There are some drawbacks to Acorns however. For one, the app charges a $1 per month fee for all accounts under $5,000 and a .25% annual fee for all accounts over $5,000. While this may not seem like a lot, you are only really investing change into Acorns. Those $1 monthly fees can really start to add up. In order for Acorns to give you any substantial return, you need to spend a lot of money. This is not always a good financial strategy.
Founded in 2013 by entrepreneurs Baiju Bhatt and Vladimir Tenev, Robinhood is a stock brokerage application that allows users to buy and sell U.S. listed stocks and ETFs with zero commission. You can use the application on your smartphone, tablet, but surprisingly not on a computer. Similar to Acorns, Robinhood‘s main marketing point is that it charges zero-brokerage fees. However with Robinhood’s service you are the one who chooses the investment option.
Robinhood claims that it has saved users over $22 million in commission fees. Within the mobile Robinhood interface, a user is limited to bread-and-butter stocks. If you’re not satisfied with only prudent investments in blue chips, you might want to hold on: Robinhood plans to implement more advanced options soon, such as options, OTC securities, mutual funds and warrants.
It would seem that there would have to be a catch with Robinhood. After all, how would Robinhood make money without charging a brokerage fee? It turns out there is no catch, just different levels of service. Robinhood offers a Gold Subscription service in which it collects interest on users who choose to upgrade (with an additional monthly fee). This premium subscription gives users access to features that major competitors like E*Trade and Schwab offer, such as after-hours trading, credit lines and larger instant deposits. However most millennials do not upgrade to the gold subscription service due to the simple fact that they originally signed up based on the premonition that the service is free. Whether or not Robinhood will be able to sustain its service is unknown.
Acquired by Intuit in 2009, Mint quickly became a hot application for millennials to track and monitor their financials. Mint links to a user’s bank account and begins to track their spending habits. Users can view exactly how much they’re spending on very specific categories: Gas & Fuel, Alcohol and Bars, Uber rides, etc. Mint is entirely free and regarded by experts as very secure based off industry standards.
The spending habits tracker is just the tip of the iceberg for the services Mint offers. In addition to the tracking feature, Mint offers a budgeting application, credit score ratings, investment tracking, account security monitoring; the list goes on and on. Mint even claims by using their service, they will begin to help save you money. Many millennials are in fact finding that using Mint’s free app saves them money in a world where it is becoming increasingly easy to carelessly spend.
– Sam Kuchma