We all know that we should be saving and investing, but few of us have a clear idea of how. A lack of financial products and services that “speak our language” is a major stumbling block for many millennials. Lack of financial literacy and increasingly small personal budgets make investing seem increasingly out of reach for a growing segment of the population.
But, with the rise of online banking, a number of apps have stepped into the vacuum to help would-be investors turn their spare change into legitimate investments and long term savings. These apps help you identify your investment goals, create a risk profile, and simplify the investment process, eliminating most of the reasons why people don’t invest. But, they aren’t without their flaws.
So how do you know if an investment app is right for you?
Begin by doing your homework. Check the fees and the minimum investment amount. The general rule of thumb is that if you have less than $5000 to invest each year, investment apps may be your best option. They allow you to begin investing with just a few dollars.
Also, take a sober look at your finances and your goals. Don’t think if investment apps as a savings account (though some apps offer this option). Rather you should plan to let your money sit for the long haul. If you can’t afford to get by without this money for at least five years, maybe now is a good time to look at your spending habits and reevaluate your options.
Investment apps are great for newbies, students, and people with a limited income. Many, like Stash, help you to learn the basics of investing as you go along. They demystify the process and help you to understand just where your money is going and how it will work for you. A few, like Robinhood, will take some know-how to navigate. They allow you greater flexibility in terms of investment options but they assume that the user has a basic understanding of investments. Others, like Swell and Stash, allow you to make socially conscious investment decisions.
In the end, the usefulness of investment apps is undeniable. It is an amazing tool to help people who are thinking about investing but don’t have a large amount of money to invest upfront. It’s also great for young people who are learning how to make their money work for them.