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A Tangled Financial Web

Making Sense out of Online Money-management Tools

Jim Taschetta of Burlingame, Calif., promised his 4-year-old daughter a day at the movies. They took in Finding Nemo, ate popcorn and other goodies and spent about $25 for the two-hour outing. Taschetta says parents often worry about how to finance their kids' college educations, but, he asks rhetorically, what about their first 18 years? "You have no idea how expensive it is until you actually have a child," says Taschetta, who also has a 2-year-old.

Taschetta not only is a concerned, budget-minded dad, he's also chief marketing officer of Yodlee, a Redwood Shores, Calif.-based company that helps consumers worldwide find efficient ways to manage money online. He implores parents to get their financial lives in order and to use money-management tools available online to do so. "With fairly little effort, a parent or anyone can get a lot of value out of an online tool," Taschetta says. And he says they don't need to be terribly tech-savvy to do so.

Here are some tips and tools parents can use to track their budgets, set financial goals, view their net worth, pay bills and do other transactions, all through Internet-based applications. These suggestions are by no means exhaustive, but they're a great start to better managing your finances.

All in One Place

According to Taschetta, the average Internet user has between eight and 10 financial products items such as credit cards, bank accounts and investment accounts. And the average user accesses those products through four or five different financial institutions. "So in general, your life is fairly complex," he says. Without organizing all that information, "it actually becomes more onerous and burdensome."

Some people use software like Quicken that requires the user to input all the financial information he would like to keep close tabs on. But most folks, Taschetta included, aren't motivated enough to enter earnings, expenditures, investments and other information on a daily basis.

Fortunately, there's been a recent trend toward consolidation, and many online money-management tools will consolidate a user's financial information. "A few years ago studies indicated that about 66 percent of current online users of financial services wanted a consolidated view of their accounts online," says Kathleen Sindell, author of Investing Online for Dummies (For Dummies, 2002). This key feature helps people visualize everything – all at once and all in one place – so that each account, transaction and earning is connected to the entire financial puzzle.

Budget-Tracking Tools

Creating and following a budget can be a great way for families to learn where they are spending their money and make decisions on where to cut costs.

At popular sites like Yahoo! Finance and MSN Money, there are online budget-tracking tools. Customers go through a registration process that includes inputting credit card and other personal information and supplying a username and password. The sites do daily updates for you, and users can set up categories of expenditures, such as clothing, groceries and entertainment, "to get a relative feel for where [your] money is going," Taschetta says.

People quickly learn where their dollars are really off to and where they're not. Amy Talley, mother of a 14-month-old daughter, says using budget-tracking software was very eye opening and important to her family's bottom line.

"It really became apparent that we would have to cut back on eating out/ordering in as much," says Talley, a mom from Burke, Va. "We knew we were spending more than we should, but it wasn't until I added it up that I knew how much it really was."

Protecting Your Porfolio

Other features in cyberspace for budget-minded parents are goal-planning tools, which allow the user to manage and view investments, such as stocks, 401Ks, 529 plans and CDs in one location.

Companies like Fidelity offer goal-planning software where parents can do scenario planning and learn how to adjust their portfolio to – hopefully – ensure they'll have enough money to send Junior to an Ivy League school and comfortably retire at a certain age.

Even the federal government is in on catering to parents – of all income levels – and their desire to invest. Since May 2003, the U.S. Treasury Department's Bureau of the Public Debt has offered investors the ability to purchase and manage Series EE and I savings bonds online.

While these bonds aren't traditionally huge moneymakers, investors can expect a steady return on their purchase of treasury debt. You can purchase a Series EE or I bond for as little as $25 or as much as $30,000, and with the advent of online availability, people can transact 24 hours a day, seven days a week.

Parents can use EE or I savings bonds to finance their child's education, according to the Bureau of the Public Debt. Money made on these bonds are exempt from state income tax, and some people may even qualify for the Education Tax Exclusion.

MSN money expert Liz Weston says though most online money- management resources aren't exclusively for parents, many companies offer software, such as Microsoft Money, that have specific information about saving for college.

Dave Connor, a stay-at-home dad from Lewisville, Texas, and avid Internet user, recommends SavingforCollege.com for parents bent on budgeting for their children's higher educations – now.

It's never too early to start, he says. "When [our daughter] came along, that was our whole new set of expenses," Connor says.

Roadblocks on the Information Superhighway

Just because a user can make every transaction she'd like online, that doesn't mean she's comfortable doing so. Lots of people prefer speaking to a live person before, say, inputting information or transferring funds from one stock to another.

Many financial institutions recognize this need for the "human touch," as Taschetta puts it. Sites like Fidelity's include phone numbers so that an investor can call and get a live analyst or customer-service representative on the phone to answer questions or make recommendations. In fact, some institutions even include a feature on their sites that signals the wary user to call the company for more information.

And what about security concerns? Newspapers often run stories about identify theft and credit card companies hacked by computer whizzes. For some, these issues are non-issues.

Talley says she manages her money online for "the convenience factor." "I can get in, do what I have to do and get out all within a couple of minutes," she says. "I actually don't think that I have any drawbacks. As a matter of fact, I can't imagine doing it any other way."

But others are concerned enough to do their homework about a given site before unloading their private account information into it.

Connor is a self-described "Quicken junkie" and frequent user of online money-management tools. He loves the ease of using online applications that allow him to view his pertinent information – medical insurance, investments, checking account, 401Ks – all at one click.

He uses MSN.com's money-management applications, but you better believe he researched the company's record before signing on. He says he's probably one of the few who actually prints out and reads every word of companies' security agreements. He does this not only to ensure his information remains private but also to avoid receiving spam from third-party marketing firms. If, during his research, he finds a company's database has been penetrated just once, he looks elsewhere to do business.

Getting Started

Millions of people are taking advantage of online money-management tools, but there is still a chunk out there who either find the Web too daunting or too mysterious to use to their financial advantage.

People like Connor and Taschetta say parents should give online money management a shot.

Connor, who has bookmarked 50 finance-oriented sites, says he's researching a new life insurance policy for himself. Without the ease of the Internet (and he prefers Quotesmith.com for this and similar searches), he probably would have abandoned the search for the best plan for his family long ago.

Taschetta reminds busy parents that setting up, for instance, a personal budget-tracking tool takes very little time, and the rest of the work is done for them. To get started, he advises parents to first browse their banks' and other financial institutions' Web sites to become familiar with their offerings and look and feel, and then log on.

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