Online money managers take strain out of finances
If you have trouble keeping track of your monthly spending, a new type of website can help you to stay out of the red. Chiara Cavaglieri reports
Sunday 06 February 2011
How much do you spend on clothes, food, fuel or just dining out each month?
What returns are you getting on your savings or investments? Most of us would not be able to answer such questions, but with prices of even basic goods rising at the fastest rate in a generation, it could be time that we should be able too. Without keeping ledgers and every receipt or account statement, though, how can you keep an eye on your finances? This is where a new breed of all-in-one money-manager websites steps in.
As the name suggests, this type of website assembles information from various accounts in one place. It is already well established in the US with personal finance manager Mint.com proving a success. The UK has been slower to react, but independent sites such as the newly launched Money Dashboard are hoping to change that.
"Not so many people know who their bank manager is and even fewer have access to a financial adviser as a result of which they need to learn how to self-serve," says Gavin Littlejohn, the founder and chief executive of Money Dashboard.
Many banks are keen to get in on the action, too, with Lloyds rolling out a new free online Money Manager service for its customers this month. Lloyds already offers free text alerts to its current account customers when they are near their account limit to avoid slipping into the red, as well as weekly balance alerts featuring the last six transactions of the week and overseas transaction alerts when their debit cards are used abroad.
This move into account-pooling follows the example of other banks including First Direct's Internet Banking Plus service and the Egg Money Manager, both of which enable customers to access balances for their current accounts, credit cards, savings and even loans on the same summary page.
Both of these are limited to simply showing you the balances of all your accounts. But the new Lloyds service takes things a step further. Firstly, you can categorise your outgoings into groups which helps you to identify at a glance where potential problems lie. Lloyds Money Manager will even be able to look at how your spending has accumulated over set periods to reveal any bad habits and underline just how much of your cash is frittered away on the daily sandwich and coffee run.
"Users can see their spending broken down into categories, such as entertainment or rent, and track spending trends for up to two years. Money Manager does all the hard work so customers don't have to upload their own data. It's all done at the click of a button, backed up with the protection of their banking internet site," says Annie Hind of Lloyds.
This service is limited to Lloyds credit cards and current accounts only. If you want to get a clearer understanding of your overall financial health, an independent service such as Money Dashboard is probably a better bet: it allows you to track your finances in real time and offers an extensive range of budgeting tools to help you to manage your money.
As with the services offered by First Direct, Egg and Lloyds, you can save time by accessing all of your financial products on one page and with only one set of password and security questions. The clever bit is that you can tag different transactions, for example, your monthly direct debit for rent or payments to your favourite supermarket, which automatically enables you to assign them a category.
One of the most useful features is the alert and messaging system which can be set up to warn you, via text or email, when you've overspent, when you're nearing your overdraft, or even when you have a bill to pay. For now, Money Dashboard allows you to load only current accounts, credit cards and savings, but there are plans to integrate other investments and loans and a smartphone mobile application is also on its way.
From a security perspective, the likes of Money Dashboard offer a read-only service so you cannot make transactions. Your bank account numbers and passwords are not actually stored on the servers but are encrypted and sent to Yodlee – a platform used by some of the biggest banks in America – so fraudsters are not in a position to ransack your accounts easily.
If your motto is better safe than sorry, though, you may decide that having all your financial details in one place is simply too risky. And as another word of caution, it is worth noting that several online aggregator sites have fallen by the wayside, including Kublax, which went under last year after struggling to get funding.
Another concern is that these services may not sit well with your bank. Several banks, including HSBC, Barclays and NatWest, seem to take a dim view of online account aggregation services to the point that you could be liable for any fraud or mistakes because you are, in effect, handing over your passwords and login details. Other banks take a different stance, so you will need to speak to them before signing up to ensure the software is approved.
There is also the issue of how these services make money, and this will predominantly be by cross-selling other financial products to you. Armed with comprehensive details of exactly how users spend and borrow money, there could be unease that they can all too easily target consumers for specific products that they don't necessarily need or want.
This is more of a concern with banks flogging only their own products and potentially using the service to keep a firm grip on their customers by becoming a one-stop shop for all their financial needs. However, Andrew Hagger of Moneynet argues that as long as you remember that there is no obligation to buy any product, this shouldn't be a problem. Furthermore, with the independent websites, there is no reason why this cannot be a good thing for consumers.
"In fact, with all the information at their disposal you'd expect and hope that any marketing material would be a bit more targeted and relevant to your financial circumstances rather than the scatter-gun mailings used by some financial providers at the moment," he says.
Andrew Hagger, Moneynet.co.uk
"With people leading busy lives and having less spare time on their hands, aggregation services are a time efficient way to monitor and manage all your financial products. The security provided by account aggregators will probably be one of the initial concerns to would-be new customers. However, most of the providers are financial heavyweights which take security measures extremely seriously. I've never heard of any security issues with any of these services."
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