Investing can feel like a big step, especially if you’re new to it. You might have heard about Acorns, a popular app that makes investing simple by rounding up your purchases and investing the spare change.
But the big question is: Is Acorns safe to invest? Let’s dive into what Acorns is, how it works, and whether your money is secure with this platform.
What Is Acorns?
Acorns is a micro-investing app designed to make investing easy for beginners. It automatically invests small amounts of money, like the change from your everyday purchases.
For example, if you buy a coffee for $3.75, Acorns rounds it up to $4 and invests the $0.25 difference. Over time, these small investments add up, helping you build a portfolio without much effort.
The app offers different account types, including personal investment accounts, retirement accounts (IRAs), and even checking accounts.
Acorns also provides educational content to help users learn about investing. Its simplicity and low entry point make it attractive for young investors or those with limited funds.
How Does Acorns Work?
Acorns connects to your bank account or credit card. It tracks your transactions and rounds up each purchase to the nearest dollar. The spare change is then invested into a portfolio of exchange-traded funds (ETFs). These ETFs are diversified, meaning they spread your money across various stocks and bonds to reduce risk.
You can also set up recurring investments, like $5 a week, to grow your portfolio faster. Acorns offers five portfolio options, ranging from conservative (safer, lower-risk investments) to aggressive (higher-risk, potentially higher-reward investments). A financial advisor team, led by experts, designs these portfolios to suit different risk levels.
Is Acorns Safe? Key Factors to Consider
Safety is a top concern when investing. You want to know your money is protected and that the platform is legitimate. Let’s break down the key factors that determine whether Acorns is safe.
1. Regulation and Oversight
Acorns is a registered investment advisor with the Securities and Exchange Commission (SEC). This means it must follow strict rules to protect investors. It’s also a member of the Financial Industry Regulatory Authority (FINRA), which oversees brokerage firms. These affiliations ensure Acorns operates under government regulations, adding a layer of trustworthiness.
2. Account Protection
Your investments with Acorns are held by a third-party custodian, typically Apex Clearing Corporation. This company is a member of the Securities Investor Protection Corporation (SIPC). SIPC protects your account up to $500,000 (including $250,000 in cash) if the custodian fails. However, this protection doesn’t cover market losses—only losses due to the firm’s failure.
Here’s a quick look at what SIPC covers:
| Scenario | Covered by SIPC? |
|---|---|
| Brokerage firm goes bankrupt | Yes |
| Market losses | No |
| Fraud by Acorns employees | No |
3. Data Security
Acorns uses bank-level encryption to protect your personal and financial information. This includes 256-bit SSL encryption, which is standard for secure online platforms. The app also offers two-factor authentication (2FA) to prevent unauthorized access to your account. These measures make it harder for hackers to steal your data.
4. FDIC Insurance for Checking Accounts
If you use Acorns’ checking account (called Acorns Spend), your money is held at FDIC-insured banks. This means your deposits are insured up to $250,000 per depositor, per bank, in case the bank fails. Note that this insurance only applies to the checking account, not your investment accounts.
5. Transparency
Acorns is upfront about its fees and how it operates. The app charges a monthly fee, starting at $3 for a personal account, $5 for a personal plus account, and $9 for a premium account. These fees cover investing, banking, and educational features. While fees can eat into small balances, Acorns clearly explains them on its website.
Benefits of Investing with Acorns
Why do people choose Acorns? Here are some reasons it’s a popular choice:
- Ease of Use: The app is user-friendly, making it great for beginners.
- Low Minimums: You can start investing with just $5.
- Automatic Investing: Round-ups and recurring investments make saving effortless.
- Diversified Portfolios: ETFs spread your money across many assets, reducing risk.
- Educational Tools: Acorns offers articles and videos to teach you about money management.
Risks to Keep in Mind
No investment platform is without risks. Here are some potential downsides to consider:
- Fees for Small Balances: The $3-$9 monthly fee can be high if you have a small account. For example, a $3 fee on a $100 balance is a 3% annual cost, which is steep.
- Market Risk: Like all investments, your Acorns portfolio can lose value if the market drops.
- Limited Control: Acorns manages your portfolio, so you can’t pick individual stocks or bonds.
- Not Ideal for Large Investors: If you have thousands to invest, other platforms with lower fees might be better.
How Does Acorns Compare to Other Platforms?
To understand Acorns’ safety, it helps to compare it to similar apps like Robinhood or Betterment. Here’s a quick comparison:
| Feature | Acorns | Robinhood | Betterment |
|---|---|---|---|
| Regulation | SEC, FINRA | SEC, FINRA | SEC, FINRA |
| SIPC Protection | Yes, up to $500,000 | Yes, up to $500,000 | Yes, up to $500,000 |
| FDIC Insurance | Yes (checking account only) | Yes (cash management account) | Yes (checking/savings accounts) |
| Minimum Investment | $5 | $0 | $0 |
| Fees | $3-$9/month | No commission fees | 0.25% annual fee |
Acorns is similar to its competitors in terms of regulation and protection. However, its flat monthly fee makes it less ideal for small accounts compared to Betterment’s percentage-based fee or Robinhood’s commission-free model.
Tips for Staying Safe with Acorns
Want to make sure your money is as secure as possible? Follow these tips:
- Enable Two-Factor Authentication: Add an extra layer of security to your account.
- Monitor Your Account: Check your transactions regularly for anything unusual.
- Understand the Fees: Make sure the monthly fee makes sense for your investment size.
- Diversify Outside Acorns: Don’t put all your money in one platform. Consider other investments like a 401(k) or savings account.
- Stay Educated: Use Acorns’ resources to learn about investing and make informed choices.
FAQs: Is Acorns Safe to Invest
Q. Is Acorns a legitimate company?
A. Yes, Acorns is a legitimate company registered with the SEC and a member of FINRA. It has been operating since 2012 and serves millions of users.
Q. Can I lose money with Acorns?
A. Yes, all investments carry the risk of loss. Your portfolio’s value can go down if the market drops, but Acorns uses diversified ETFs to help manage risk.
Q. What happens if Acorns goes out of business?
A. If Acorns shuts down, your investments are held by a third-party custodian, not Acorns itself. SIPC protection ensures you can recover up to $500,000 if the custodian fails.
Q. Is my personal information safe with Acorns?
A. Acorns uses bank-level encryption and offers two-factor authentication to protect your data. While no platform is 100% hack-proof, these measures reduce the risk.
Final Thoughts
So, is Acorns safe to invest? The answer is yes, for the most part. Acorns is a legitimate, regulated platform with strong security measures like encryption, SIPC protection, and FDIC insurance for checking accounts.
Its diversified portfolios and beginner-friendly design make it a solid choice for new investors. However, you should be aware of the fees, especially if you’re starting with a small amount, and remember that all investments carry some risk.
Disclaimer: This blog is for informational purposes only and should not be considered financial advice. Investing involves risks, including the potential loss of principal. Always consult a qualified financial advisor before making investment decisions. The information provided is accurate as of April 27, 2025, but fees, features, and regulations may change. Do your own research before investing with Acorns or any platform.
