I recently came across a new investment app that has become popular over the past year. The app, called Acorns provides a tool that rounds-up a user's debit or credit card purchases and then deposits that money into a portfolio comprised of ETF funds. As an example, if you purchased a $2.67 cup of coffee, Acorns would take an additional $.33 cents out of your account to round the total purchase up to $3.00. The $.33 would then be put into an investment account.

The investment accounts that they provide are a basket of ETF funds that are selected by "a group of engineers mathematicians, and a Nobel-prize winning economist..." The entire investing process is automated, meaning the algorithms automatically choose a diversified basket of ETF funds and rebalance the portfolio when it is deemed necessary. Because it is all automated, the fees are relatively low. Fees are $1 per month for accounts with less than $5,000 or .25%/year for accounts with $5,000 or more in them. This is separate from any fees charged by the ETFs that Acorn chooses, but ETF fees are generally as low as you are going to get.

While the round-up funding method is the one that is most discussed, users can also choose to simply transfer a fixed amount of money into their investment account.

I was a bit skeptical at first but after I watched the video embedded below, I think that they are on to something. If a young person, or even an older person dips their toe into the water by investing round-ups, that removes many of the barriers to getting started as an investor. After all, what generally stops someone from investing is fear and a lack of what to do: how much should I invest, where should I invest, how much should I put in which funds, etc. But Acorns makes it easy for someone to start putting money to work and once this process starts it seems like an easy path to become a life-long saver and investor.

I also agree with one other point mentioned in the video. Financial educators can yell until they are blue in the face that people should start investing, but getting someone to take that first-step is the best way to get introduce them to the practice of savings and investing. Once someone has money in the market, they are much more likely to pay attention and be open to education.

My One Concern

The one concern I have, the reason I haven't signed up yet is security. Acorns is probably safe and I'm sure they have done everything in their power to secure it, but I've seen too many instances where "secure" systems were breached and social security numbers and other sensitive data was stolen. I'm sure Acorns is no less secure than any other major bank or brokerage but still, I feel nervous providing my information over a phone app.

Still, if I can get over this concern, Acorns is something I would be interested in checking out.

Former Federal Reserve Chairman Ben Bernanke lifted the curtain on a new Blog he will write (visit the Blog) and it's already interesting reading for those who follow the interest rate environment. In it, he explains why interest rates are so low and directly addresses critics who have accused him of throwing seniors under the bus by engineering a low savings rate environment.

First, the reason that rates are so low. Ben Bernanke explains that the Fed sets interest rates based on an ideal equilibrium rate that is based on the return of capital. In simpler terms, the interest rate is set based on the growth of the economy. If the economy is in recession or growing slowly, then interest rates will be low. If an economy is healthy and expanding, then interest rates will be high. Interest rates have been low for so long because the economy is just not growing very much.

Over the years, many commentators on this site and on other banking sites have complained that the Fed is killing savers and especially the elderly, who rely on fixed income investments (often CDs) to fund their livelihood. Mr. Bernanke responds to that criticism directly:

" When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy-setting Federal Open Market Committee of “throwing seniors under the bus” (to use the words of one senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings and able to obtain only very low rates of return on those savings.

I was concerned about those seniors as well. But if the goal was for retirees to enjoy sustainably higher real returns, then the Fed’s raising interest rates prematurely would have been exactly the wrong thing to do. In the weak (but recovering) economy of the past few years, all indications are that the equilibrium real interest rate has been exceptionally low, probably negative. A premature increase in interest rates engineered by the Fed would therefore have likely led after a short time to an economic slowdown and, consequently, lower returns on capital investments. The slowing economy in turn would have forced the Fed to capitulate and reduce market interest rates again. This is hardly a hypothetical scenario: In recent years, several major central banks have prematurely raised interest rates, only to be forced by a worsening economy to backpedal and retract the increases. Ultimately, the best way to improve the returns attainable by savers was to do what the Fed actually did: keep rates low (closer to the low equilibrium rate), so that the economy could recover and more quickly reach the point of producing healthier investment returns."

What he is saying here is that the Fed had no choice but to keep rates low because that is what the economy warranted. The Fed didn't choose the rate, the economy did. If the Fed had raised rates when it wasn't warranted, the economy would have gotten worse and forced the Fed to lower them again for a potentially longer period of time.

He finished with the following statement:

"The state of the economy, not the Fed, is the ultimate determinant of the sustainable level of real returns. This helps explain why real interest rates are low throughout the industrialized world, not just in the United States."

It's hard to argue with this logic. The real pain for savers over the past seven years came from the collapse of the largest housing bubble in history, as well as shifts in technology, trade, and demographics that have put enormous stresses on Western economies. Until Western economies figure out how to stimulate real growth again, the Fed will just be the caboose laying down low rates for the foreseeable future.

Shopping for a new CD, savings account, or credit card in 2015? Below are the BestCashCow best bets.

Most Innovative Online Banking Product for 2015

The most innovative online banking product introduced in 2014 and available to consumers in 2015 is CIT Bank’s flexible CD products known as RampUp CDs. The RampUp products are Certificates of Deposit that allow online savers to take advantage of higher CD rates, yet avoid what many perceive to be the pitfalls of locking money up for an extended period of time when we may be on the precipice of dramatically higher moves in rates.

CIT Bank is the only online bank offering RampUp CDs which range in duration from 1 to 4 years. With more flexibility than a standard CD product, CIT’s RampUp CDs are suitable for those with either short- or longer-term savings goals. In today’s challenging economic environment, this flexibility can help customers achieve their savings goals more easily.

Each of the RampUp products allows a 1 time rate increase if rates should rise. The 1 and 2 year products – called RampUp Plus - also allow depositors to add to their CD balance 1 time during the course of the CD. While CIT Bank itself offers slightly higher rates on 2, 3 and 4 year Jumbo CD products, the RampUp products all offer extremely competitive rates and are a BestCashCow.com Best Bet for 2015.

Most Interesting Opportunity Nationally for depositors to take advantage of a development in local banking

Over the last 18 months or so, several regional Massachusetts based banks have begun offering online banking at extremely competitive online savings rates. Five banks in particular (Salem Five, East Boston Savings, Bank 5, Radius Bank and Northeast Bank) offer online savings rates above 0.85% and, even more importantly, four of the five offer these rates to residents of all US States (East Boston restricts online accounts to residents of New York State and New England). This heavy online banking presence by Massachusetts banks is particularly interesting to savers as banks chartered in Massachusetts are covered by DIY insurance, a special insurance fund that covers deposits to a limit of $1 million per account holder (FDIC insurance only provides coverage to $250,000). DIY insurance applies regardless of the account holders’ state of residency. While service levels may be less than optimal in some of these online banks, and banking interfaces may be less easy to work with than those of the better known online banks, this development gives those looking to deposit sums up to $1 million in a single online banking account more flexibility to pursue the most competitive rates.

Most Valuable Travel and Rewards Card for 2015

The editors of BestCashCow have voted the US Bank Club Carlson card a BestCashCow.com Best Bet for 2015. In our view, the card ranks far and away as the best value in hotel loyalty programs for those who are able to optimize the redemption opportunities offered to its users. The card has significant sign up and renewal benefits that are on par with any hotel rewards credit card. New card members receive 50,000 Club Carlson Gold points immediately after signing up, plus 35,000 points after spending $2,500 in the first 3 months; card members also receive 40,000 points on each anniversary. Moreover, each $1 spent on the card accrues 5 Club Carlson points. Since BestCashCow values each Club Carlson point with a redemption value as high as 2 cents, this card can deliver as much as 10 cents in value per $1 spent. A card-holder will only receive these high point redemption values if the points are redeemed at the most luxurious Radisson Blu properties in New York, London, Chicago and Paris, and if a holder also takes advantage of the last night free option on a stay of over one night.