Is it safe to store personal financial data online?

Security is a major issue to consider in choosing personal finance sites. Issues to think about include where your account data is stored, how well it is protected and what sort of personal information you have to provide when you sign up. Most experts say that data stored on a company's server is actually more secure than if it were stored on a PC, especially since many owners tend to be lax about installing and updating security software on their home computers.

Companies that provide online financial management services offer data security and encryption that is equivalent to that of banks and other financial institutions. Because the user provides only an email address, zip code and password when signing up for the service, data remains anonymous -- no name or Social Security number is attached to the accounts that are stored on the server. Many companies contract out their automatic account aggregation service to a third party -- most to Yodlee, which also provides this service to major financial institutions (and has its own personal finance website). When a company uses an account aggregation vendor, its employees do not have access even to account numbers or data.

Still, some people balk at the idea of providing login information for all their accounts to a financial website. People with such concerns may be happier with desktop accounting software, or personal finance sites that do not require this information. Buxfer.com, for example, gives users the option to export account data from their financial institutions' websites, then upload it to their Buxfer.com account -- thus no need to provide your login information. Both Buxfer and Yodlee also offer automatic account aggregation as an option.

Features make a difference

Reviewers say you should consider the following when selecting a personal finance site:

  • Read the company's security and privacy policies. These should be readily available on the company's website. Check for certification from a reputable security company like VeriSign, Entrust or Symantec.
  • Check that your banks and other financial institutions are supported by the site. This will mostly be an issue if you use a small local bank or credit union.
  • Be sure the personal finance site you choose has easily accessible help features and customer support. Read message boards and poke around the site's help section to see how much information is available and how responsive the support team is. Some sites offer tutorials, interactive forums or even help via Twitter.
  • Decide whether you need complex spending and investment reports or basic reports that track recent spending and savings. Depending on your financial profile, some of these reports might either be overkill or provide too little information to be useful. Some sites excel at budget reporting, helping you to rein in spending and build up your savings account.
  • Check out the site's mobile offerings if you want to access your information on the go. All apps let you view your financial data, but you might not be able to update that data from your mobile device. Most apps are available for Apple or Android mobile devices, but support for other platforms is more iffy.

If you're looking for a desktop solution for tracking finances, see our report on accounting software. We also have a report that covers online bill paying.

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