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Acorns Targets Baby Investors While UNest Offers UTMAs

Investing apps aimed at young investors are rolling out custodian accounts for their children formed under the Uniform Transfers to Minors Act (UTMA).

Digital investing platforms are increasingly steering college savers toward UTMA accounts, otherwise known as “the granddaddy of college savings accounts.” Acorns is encouraging families to invest early and invest often with two new features, called Early and Family, targeting "baby investors" and parents interested in saving and investing for them. Uniform Transfers to Minors Act (UTMA) accounts, or the similar Uniform Gifts to Minors Act (UGMA) accounts, are basically standardized trust accounts for securities or investments irrevocably donated by parents (or others) and controlled by a designated custodian until the child comes of age. 

Meanwhile, college savings app UNest, which currently offers 529s, will roll out UTMA accounts “over the next few months,” according to a spokesperson.

The new Acorns feature, Early, opens an account structured as a UTMA/UGMA account and is offering a new pricing tier, called Family, that essentially organizes users on a household level and costs users $5 a month. Users at the Family level have the ability to open multiple accounts for children at no additional cost and get retirement, investing and checking features, as well as savings from its partner programs.

Both firms cited flexibility of use in supporting UTMA/UGMA accounts.

“Unlike a 529 that can only be used for education, you can use the funds for anything that benefits the child” Acorns said of UTMA/UGMA accounts, in materials on its site. It did not respond to questions for more detail about the accounts or their pricing.

Acorns places funds in its “aggressive” automated investment portfolio. Acorns portfolios are constructed of ETFs, including BlackRock's iShares. BlackRock owns a stake in Acorns.

There’s “pent-up demand…for well thought through saving solutions for parents,” said Ksenia Yudina, CEO and founder of UNest. While UNest will eventually offer both 529s and UTMAs, she said Acorns’ decision to focus on UTMAs makes sense, considering its user base and the complicated nature of 529s.

“It's more difficult for the Acorns typical demographic of 20-something singles to commit to a 529 that is solely focused on getting kids through college,” said Yudina. “Plus, 529s are much more complex to get to market.”

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