Only tracking your finances online is a good way to lose track of your finances.
Money is like time – we often wonder just where it goes! If you’re asking that question because you’re spending it faster than you make it, that’s one thing. But if you’re wondering where your cash is because you have trouble keeping track of your online accounts, then that’s something else altogether.
Most financial institutions today encourage their clientele to manage their funds, statements, bill payments and other transactions via in-house online systems. Others have migrated these services to “the cloud”, where customer data and applications are stored on remote Internet servers. There are definite advantages to these “anywhere-anytime” financial management capabilities. But, there are also some downsides to relying entirely on online tools to monitor your balances.
According to an expansive study conducted by Pitney Bowes, printed statements or bills receive more attention than their web equivalents1, a conclusion that supports the existence of a phenomenon that Douglas Rushkoff calls “Internet ADD”. Mr. Rushkoff, a New School University professor and author, argues that we tend not to read things in depth online and therefore can fail to assimilate key information.2 Jakob Nielsen, a web-usability expert and author specializing in how people interact with technology, agrees and adds that this more superficial processing of information can lead some to lose sight of the long-term impact of their spending habits.” 3
This may partially explain the noted preference of many people for keeping printed copies of the financial records, such as bank statements. According to Emmett Higdon, senior analyst of e-business and channel strategy at Forrester Research, only about 24% of U.S. bank account holders have given up paper statements and 37% of those who receive a paper statement today say they will never abandon paper in favor of online statements.4 Investors in the U.S. feel similarly, with only about 10% adopting electronic delivery of their statements and other financial documents over the last three years. Ask them why and they’ll tell you they simply prefer paper!5
The digitization of programs like Social Security has seniors in the U.S., whom are not Internet savvy, very concerned about their finances. Starting in 2011, new recipients no longer had the option of printed statements or paper checks, which have been replaced with either a pre-loaded debit card or direct deposit. Advocacy groups argue that many recipients are profoundly uncomfortable with their ability to cope with the new process.6 Meanwhile, other citizens who do not have access to the Web or even own a computer, are equally unhappy about the U.S. government’s decision to stop mailing out tax forms, worrying they may miss key deadlines because they can’t obtain the proper documents.
While paper has proven a reliable method for tracking finances since time immemorial, many questions have been raised about the security of strictly online money management. As with any computer-based system, transactional technologies can fail. Servers can go down, cancelling out that acclaimed on-demand accessibility. As protected as they may be, servers can always technically be hacked into – and you could lose everything. Not having the benefit of human intuition, online systems don’t necessarily signal or react to process changes (like a new address for a payee) and could stop paying your bills – which is clearly a problem...
Most institutions keep computerized records for only a limited amount of time, some only a few months, a fact that organizations such as the IRS or credit card companies are unlikely to sympathize with should an issue arise. Plus, while institutions process millions of transactions a day, people typically have only about 60 days to report discrepancies, which aren’t always obvious on an online statement. This, of course, assumes that you’ve seen your statement and it hasn’t been lost in an overflowing email box or sifted out by an anti-spam program.
The experts advise people to remain vigilant in monitoring their Web-based accounts even if online financial services providers assure that everything is taken care of. Mike Herd of NACHA, the electronic payments association, cautions that even after you sign up for online banking or automatic bill-paying you should still make sure to review your statements on a regular basis.8
On the one hand, technology can make managing our finances faster and more practical. On the other, tracking our funds exclusively online can make it more difficult to keep a firm handle on our spending. It could even have unwanted impacts such as being charged late penalties or not recovering funds that have been sent to the wrong place.
And isn’t it already hard enough to know where our money goes?
1 Are we paying attention? A study of the attention span given to bills, statements, official correspondence and direct marketing. Pitney Bowes, 2007
2 Rushkoff, Douglas. The Decade Google Made You Stupid. www.thedailybeast.com, December 13, 2009
3 Kiviat, Barbara. What Gets Lost When our Finances Go Paperless. www.time.com
4 Koa, Beth. Will Paperless Payments Take Off? High Beam Research. May 1, 2011
5 Investors: I Still Want My Paper Statement; This Mindset Caused in Part by U.S. Regulations That Favor Paper Delivery. Dalbar Press Release, July 26, 2011
6 Paper Checks for Key Government Services Fill an Important Role
7 Study highlights importance of paper statements. Post and Parcel. September 16, 2010
8 Goldwasser, Joan. Electronic Bill-Paying Snafus: Online banking is convenient but not foolproof. Kiplinger's Personal Finance magazine, December 2006