A Penny Saved is a Penny Earned

Courtesy of Elephant's Paycheck.

Written by Aaron Choi

Traditional banking is facing many more competitors than ever before. Instead of choosing which platform to open a brokerage account, individuals are faced with a plethora of options to invest money with.

While the phrase doesn’t literally mean that saving a penny will earn you a penny, mobile apps like Stash and Acorns are helping millennials put their spare change to work. The idea is to accumulate funds to invest with, either unconsciously, like when you round up your purchases to the dollar, or consciously, by actively depositing money from your accounts. With these funds, you can invest in portfolios just as you would with a seasoned financial advisor, having access to investments like corporate bonds, REITs, ETFs, and your usual large and small cap stocks. These mobile apps are transforming traditional banking and money management, and it seems the fintech industry is growing larger each year.

With Stash and Acorns, portfolios are preset to different risk tolerance levels. For the 55-year-old soon-retiree, conservative portfolios hold higher proportions of bonds than stocks or the 18-year-old Stern freshman, there are aggressive portfolios with a large chunk in stocks, which are more volatile than bonds. Like the already established fintech company Robinhood, there are no trading fees involved. Beyond your vanilla investing, Stash lets you find a theme to your investing. If you’re interested in investing with a purpose, there are ethical investment portfolios where you can invest in companies that promote LGBT rights and workplace equality, or companies looking to reduce their carbon footprint. Unlike a brokerage account, these apps help you find the right portfolio that fits your personality, and find you the right balance of diversification that fits your investing needs.

Beyond Stash and Acorns, other companies have disrupted traditional banking. MoneyLion and SoFi for example have transformed personal banking and student loans, respectively. MoneyLion provides affordable personal financing options to lower-income individuals. Of its 1.5 million users in early 2018, over 200,000 of them received personal loans. This approach beats out the traditional route of going to your local bank and dealing with unnecessary administrative bureaucracy. In addition, it serves customers with wealth management services, and savings toolkits. SoFi on the other hand, lends money for student loans. SoFi targets HENRYs (High Earners, Not Right Yet), found mostly in elite schools. SoFi’s strategy seems to be working quite well; as reported in 2016, the firm’s 73,000 student loans faced only 22 defaults.

Traditional banking is facing many more competitors than ever before. Instead of choosing which platform to open a brokerage account, individuals are faced with a plethora of options to invest money with. Long gone are the days when banks were the only ones with money management software. As the public has become more keen on investing, and the stock market continues to hit headlines day after day, apps like Stash, Acorns, and MoneyLion are bringing personal finance tools back into the hands of everyday people.

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