Last updated on February 1st, 2021 at 08:33 am
Budget apps are a great way to not only get a birds eye view on your finances but also give enough information to help make informed decisions about your money.
When you setup a budget app one of the first requirements is a login into checking accounts, credit cards, investments and pretty much every piece of financial data in your portfolio. Some users stop and say why trust this app to have access to my bank account. Others might say that I have done this on other apps this must be ok. Many budgeting apps are helping millions such as Mint.com, Personal Capital, YNAB, Pocketsmith, PocketGuard, EveryDollar and more. This poses the question of how safe are these budget app services.
Short answer is the popular budgeting apps are usually considered safe. Many of these services do not store or collect your information. These budget apps use a third party to connect to financial institutions such as your bank. Some of the most popular ones are Plaid, Finicity and Yodlee. Each one of these services provide read only access to basic information about your transactions and balances. This means a login is not giving the budgeting app your bank credentials or any ability to make a transaction but simply read transactions.
Without going too technical, each one of these services requires financial data to be sent over TLS, which is a secure channel for all of your financial read-only transactions. The data is stored and encrypted so even in an event of financial data breach the data compromised will be unreadable to a hacker. Plaid does a great job advertising how and what steps are taken to ensure top level security.
No financial institution including budget apps are 100% guaranteed to be secure, but by using some methods listed above these services are just as secure as your own financial institution.
Your Own Security
Many of these popular products are using best practices to ensure data is secure. Below are a few security tips to help ensure all of your financial data is as secure as possible.
If you are going to use a budget app, best to go with one that is trusted. It is usually a safe bet to go with reputable brands and larger budgeting apps. Read the terms and conditions on how financial and personal data is stored and being used. Question free services and how is that service making money if they are not charging you to use their budget app. Typically with free services your data being sold.
Multifactor Authentication (MFA)
Multifactor Authentication is a way to help ensure better security on your accounts. When using any financial banking online it is best to use Multifactor Authentication. That could set up email, text or even a rotating authentication on your account. This will help ensure that any third parties such as budget apps and even your own computer are more secure. These methods are much harder for hackers to get access to your passwords.
Same with multifactor passwords, it is best to use unique passwords for all of your accounts. For example if same password is used on multiple sites and one of those sites gets hacked, technically a hacker has a good chance of hacking your accounts. The way the accomplish this is trying your credentials on other common financial sites to see if it works in other locations. Therefore passwords are best unique and kept secure.
I have tested many of the popular budget apps and having a background in software development myself, I always look how my data is being used. I would recommend a budget app for most people looking to understand their finances and not sure where to start. Check to see what services have access to personal financial data. See how that personal data on the budget app is being used. Budget apps are not 100% guaranteed to be safe but overall by following some simple steps on securing your data they are considered safe.