Many consumers understand the benefits of strengthening their finances, but it is easier said than done. One of the reasons personal finance can feel complicated is that individuals have accounts on many platforms. These people have accounts for banking on one platform and then a brokerage account on another platform. Having your finances spread too thin can complicate your progress toward long-term goals.
Betterment is a viable solution that helps people invest, save, and manage their money in one place. The app has generated interest rates for its high-yield savings accounts and can aid you on the path to financial independence. This Betterment review will highlight some of the critical details to consider before opening an account.
What is Betterment?
Betterment is a financial services company that offers investing, banking, and planning solutions. The company makes it easy to manage all of your finances from a single dashboard. The company has helped over 800,000 customers on the path to financial freedom. Betterment has over $40 billion in assets under management and has been around since 2010.
How Does Betterment Work?
Betterment offers investing, banking, and planning services. The company guides individuals with educational resources to help them achieve long-term financial goals. You can open high-quality brokerage and bank accounts on the same platform instead of spreading your finances across many platforms.
What Does Betterment Offer?
Betterment offers many products and services that can bolster your finances. These are some of the company’s resources.
High-yield Cash Account
High-yield cash accounts have variable interest rates. The current rate is 4.75% APY, which is 11 times the national average. You can make unlimited withdrawals and won’t have to worry about any fees. Betterment high-yield savings accounts do not have any minimum balance requirements and insure up to $2 million through the FDIC. This insurance goes up to $4 million for joint bank accounts. Betterment’s FDIC insurance is eight times higher than the standard.
Checking Account
Betterment checking accounts have no fees. Any ATM fees and foreign fees are automatically reimbursed. The account comes with $250,000 FDIC insurance and a Visa debit card. You can also earn cashback rewards for every purchase. These checking accounts remove the hassles and make your money more accessible for daily spending. A high-yield cash account is optimal for money that you won’t need for a few months or years.
IRAs and 401(k)
Betterment helps individuals use traditional, Roth and SEP IRA plans. The app also supports Roth conversions if you have a traditional IRA. Through the conversion backdoor, Roth conversions can help people with high incomes contribute to Roth IRAs. Betterment has low and transparent pricing to reduce the costs of retirement accounts. Through these plans, investors can use Betterment’s tax tools to minimize how much they pay in taxes.
Crypto Investing
Investors can get exposure to Bitcoin, Ethereum, and other cryptocurrencies. The app enables automated investing so you can accumulate crypto without looking at your portfolio. Betterment offers expert-built crypto portfolios.
Retirement Planning
Betterment can offer insights and projections that help you determine how much money you need when you retire. After answering a few basic questions, Betterment can assist with your retirement planning.
What Other Features Does Betterment Have?
Betterment has additional features that help it stand out from other financial apps. These are some of the benefits to keep in mind.
Automated Investing
You can set up your portfolio to enable automated investing. This feature allows you to make frequent contributions to your portfolio without logging into your account. Betterment takes care of everything for you and uses the funds in your bank account to grow your portfolio. Investors can designate the frequency and the dollar amount. You can turn off automated investing at any time and choose from several investment portfolios.
Portfolio Options
You don’t have to be a pro to make returns like a pro. Betterment connects you with many expert-built, curated portfolios. You can choose the right portfolio for you based on your risk tolerance, financial goals, investment strategy, and other criteria.
Socially Responsible Investing
Socially responsible investing can make you feel more confident that your money is making a difference. These expert-built portfolios filter for companies that are having a positive impact on the world. The three main criteria are climate impact, social impact, and broad impact. ESG investors may greatly appreciate this feature.
Historical Performance Tool
Investors can use this tool to track the historical performances of different strategies. Based on your risk level, you can see how much an initial deposit grew over time. Risk level measures a portfolio’s concentration of stocks and bonds for each 10% increment. For instance, you can see how a portfolio with 70% stocks and 30% bonds performed. You can also see how a risk tolerance of 20% stocks and 80% bonds performed for investors. Investors can filter their returns over the past month, three months, one year, three years, five years, or all-time.
Rewards
You can receive cashback if you buy goods and services with your Betterment Visa Debit Card. Some purchases qualify for up to 5% cashback. Betterment’s cash rewards program applies to thousands of top brands, including Costco, Adidas, and TOMS.
Goal Tracker
The Goal Tracker allows you to turn life goals into money goals. You can set dollar amounts for a child’s college tuition, the down payment for a new home, a vacation, or another life goal. Betterment then helps you track your progress toward each goal you put in the app. Individuals can set target dates for each of their goals to determine how much they have to invest each month to reach their objectives.
All-in-one Dashboard
You don’t have to venture very far to see your bank account and your portfolio. A Betterment account offers an all-in-one financial resource that offers many of the essentials. You will have to use a different platform if you want to take out a loan. However, Betterment has most of what you need in one place. You can even connect outside accounts so it is easier to see your net worth and view your performance.
Investing Cost Calculator
Bettermen charges $4/mo or a 0.25% expense ratio for its expert-built portfolios. If you have an account balance below $20,000 and contribute less than $250/mo, you will have to pay $4/mo. Exceeding at least one of those benchmarks results in a 0.25% expense ratio.
Betterment Pricing and Fees
Betterment doesn’t have many fees and is a competitive choice for people who want to save money on their banking and investing. These are the fees to keep in mind.
Investing
The fee is either $4/mo or a 0.25% expense ratio, depending on the size of your portfolio and your monthly contributions.
Crypto
Every cryptocurrency transaction has a 1% trading fee. You will have to pay a 2% fee to buy and sell crypto since that is two transactions.
Cash Reserve
Clients don’t have to worry about any banking fees if they store cash in Betterment’s high-yield cash account.
Checking
The Betterment Checking account also has zero fees. You can even use the Betterment Visa Debit Card and receive cashback without paying any fees.
Pros of Using Betterment
Betterment offers several advantages for its customers. These are some of the top perks:
- Fee-free banking: You won’t have to worry about overdraft or ATM fees if you use Betterment.
- Expert-built portfolios: You don’t have to stay on top of the latest market news and analyze your portfolio constantly to achieve good returns.
- Crypto: Investors can accumulate crypto positions and are not limited to stocks.
- Cashback rewards: You can receive rewards for using the Betterment Visa Debit Card for your purchases.
- Financial planning: Betterment offers many services and tools that can assist with your long-term financial objectives. The robo-advisor can save you a lot of money while delivering valuable insights.
- Retirement accounts: Open a retirement account straight from the Betterment app. Betterment offers several choices and even helps with backdoor Roth conversions.
- Automated investing: Your portfolio will continue to grow even if you’re not monitoring it.
- Tax-loss harvesting: Betterment guides you on how to lower your tax bill with tax-loss harvesting.
Cons of Using Betterment
Betterment offers many advantages for people who want banking and investing in a single app, but you should remember these details before getting started.
- No loans: Betterment does not give people the opportunity to borrow money. You can’t even open a credit card with Betterment. If you want to take out a personal loan or a mortgage, you will have to use another platform.
- No individual stocks or mutual funds: You have to invest in expert-built portfolios instead of accumulating shares in your favorite companies.
- High expense ratio for smaller accounts: $4/mo can end up being a high expense ratio for smaller portfolios. If your portfolio exceeds $20,000, you don’t have to worry about this disadvantage. However, if you have a $1,000 portfolio, that $4/mo payment turns into an excessive 4.8% expense ratio. Finding quality funds with expense ratios below 0.20% is very easy.
Should You Save and Invest with Betterment?
Betterment is a great way to get started with banking and investing. The app is optimal for people who want to take a hands-off approach to their investing while saving money from zero banking fees. The company’s portfolio fees are in line with competitors if you can get a 0.25% expense ratio.
Betterment also helps people track their financial goals. You can set long-term goals like saving up for a child’s college tuition or short-term goals like saving money for a bicycle. The company’s financial planning resources are also helpful, and you can get started with the company’s robo-advisor.
Investors who prefer to pick their own stocks and mutual funds may prefer to use another app instead. You will need a different app if you want to get a mortgage or take out a loan. Some people use Betterment for investing and banking and then use another company when they need to borrow money or open a credit card.
How to Get Started with Betterment
Getting started with Betterment can get you closer to achieving your long-term financial goals. The company has many educational resources and helps you track your progress once you set up goals. You can open an account and get started by visiting the Betterment website.
