More Americans Ignoring Their Money

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You’d think the current economic climate would make us want to manage our money, but according Javelin Research & Strategy, more Americans are turning a blind eye to their finances.

The financial analyst firm found that one out of five consumers (19%) currently do not monitor or manage their personal finances at all — more than double the 8% rate in 2009. Additionally, the number of consumers logging online at their bank’s website to monitor account balances fell to 46% in 2010, down from 59% the year before.

“The recession caused people to adopt a head-in-the-sand mentality,” Mark Schwanhausser, senior multi-channel financial services analyst at Javelin, says. “People decided they didn’t want to look at their finances as a defense mechanism.”

Additionally, Javelin found that while similar downward trends were reported among those who use supposedly arcane methods of money management, such as relying on Microsoft Excel, they were still more popular than web-based personal finance management tools.

Only 6% of Americans say they use the online banking tools offered by their financial institutions, down from 8% in 2009. Meanwhile, only 3% create accounts on independent money management websites, such Mint.com, Geezeo or Intuit Financial Services.

Javelin’s report, “How Personal Finance Management Tools Can Redefine Online Banking and Restore Consumer Confidence,” was based mainly on data collected online from a random-sample panel of 1,995 online consumers in August.

According to Schwanhausser, it’s more than the head-in-the-sand mentality that’s preventing Americans from taking their money management practices online. Web-based tools offered by banks, he says, are often inadequate or inaccessible – many consumers don’t even know their financial institutions offer ways to track discretionary spending. And independent budgeting sites, while effective, require more time, effort and trust than most Americans are willing to give.

“Americans want instant gratification,” Schwanhausser says. People want to be able to log on to a single site, manage all of their existing accounts and monitor their discretionary spending.

Online banking tools offered by banks rarely allow consumers to aggregate separate accounts and credit lines. Independent budgeting tools, conversely, allow consumers to see all of their accounts as well as their discretionary spending patterns, but they can’t actually manage their money - transfer funds, link accounts or pay bills.

Schwanhausser believes that these tools will remain unpopular until they allow consumers to do both, a tasks he says falls to the banks, which could provide these types of options on their homepage. According to him, banks should integrate the model used by independent personal finance management sites, since they make setting up a budget about achieving a goal, as opposed to depriving oneself. “That’s how online tools can be beneficial and that’s how they should be framed,” Schwanhausser says.

Want to learn more about what works and what doesn’t when it comes to managing your money? Check out this MainStreet article that looks at six weird ways we save.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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