Noah Kerner understood the value of a dollar early in life. As a child, he sold baseball cards for quick profits. While he worked in an early job as a bank teller, he moonlighted as a tennis coach and a DJ.
Kerner is now the CEO of Acorns, a company dedicated to helping Americans do what research proves they cannot: save money. The National Institute on Retirement Security estimates the U.S. retirement savings deficit—the gap between how much should be saved to maintain living standards and how much actually is—to be as much as $14 trillion. Meanwhile, 28% of people between ages 30 and 44 have no retirement savings at all, according to the Federal Reserve. Acorns wants to turn these people into involuntary savers.
Here’s how it works. First, you link your debit or credit card to the Acorns mobile app. Then you go about your usual spending routine: Buy a coffee, hail a cab, see a movie. With every purchase, Acorns rounds its cost up to the nearest dollar—then takes the difference and invests it into index funds. Over time, spare change adds up.
Acorns “practically removes” the need “to think about savings,” says Marina Dimova, an executive at Ideas42, a behavioral design firm.
Today Acorns touts 1.7 million users averaging savings of $750 a year. In return, the company charges $1 per month for accounts under $5,000 and 0.25% per year for accounts above that. Last year Acorns secured $35 million in funding from investors. It also partnered with Airbnb and Blue Apron.
There are limits to the impact that Acorns (and rivals Digit and Qapital) can make. Someone with the median U.S. income of $47,000 needs more than $400,000 to safely retire at 65.
But the premise is sound. Kerner says Acorns “nudges” customers to boost their withdrawals. For Americans to successfully retire, and Acorns to survive, a nudge must eventually become a norm.
This article is part of “The Future of Startup Innovation” package that appears in the May 1, 2017 issue of Fortune magazine. Click here to read more from the series.
