I’ve noticed a wave of websites just dying to offer you free personal accounting services.

By linking all your accounts – checking, savings, credit cards, loans – you can see your complete financial snapshot in one place.

Let’s take a closer look at this concept – what’s in it for you, what’s in it for them, is it safe, and more.

For example, LearnVest’s “Financial Inbox” tool is free. All you need to do is…

What Are the Benefits?

Once all your accounts are linked (a one-time task) and your transactions are fully organized into folders (an on-going task), here’s what you can do.

Is This Safe?

Sounds great – but is it safe? After all, you’ll be required to enter your user name and password for each bank account that you link.

Most of these services are limited to a one-way pull of bank data to provide the snapshot of your financial life. There is no ability to withdraw or move money around. Which leads LearnVest to make claims like “there’s zero risk of someone logging in to your LearnVest account and touching your money”.

Potential Risk

While that may be true, remember that they do have your name, address, bank account and credit card numbers, detailed transactions, and more. All that amounts to a real goldmine for potential identity theft. And even if the primary company is trustworthy, you are also trusting their extended infrastructure of service providers as well.

Worthwhile Precautions

Overall I think the risk is acceptable, and I’m considering Mint.com (launched in 2007) as a central accounting tool for a charitable organization I help run. The online accessibility would be an added benefit to our group’s multiple users. As always, if you decide to go this route, protect yourself with these best practices:

How Do They Make Money?

Almost across the board the two dozen or so online money trackers out there are free to the user (that’s you). How then, do they make money?

Mint, for example, touts its “proprietary search algorithm that finds savings opportunities unique to each user”. If you’re interested in deals sent directly to you, you might see this as a benefit. For me, I prefer going to the broader Internet or better, my personal network, to research financial products and get recommendations. All businesses want to make money, and only you have your best interest in mind.

The Bottom Line

Understanding your spending patterns and closely monitoring your financial accounts may help you stay on track towards meeting financial goals, as well as catch possible fraudulent activity more quickly.

One option is a free online service like Mint or LearnVest. Expect targeted advertising and be aware of the risks of sharing your banking data online.

Another option is personal accounting software like Quicken (which offers an online option well) or iBank for Mac. While not free, the cost of ownership is relatively low, the password is stored and encrypted on your own computer, and the software provides much more sophisticated management tools and reports than the online options. If you’re already using one of these, I would stick with that.

Of course you can always go analog; try printing this free spending chart over at Amy Suardi’s Frugal Mama. I love her blog, where she writes about saving money and making life better.

Whichever the method, I’ve been tracking our family expenses for almost five years now and it is a powerful tool for keeping us in line, plus a huge time and stress saver come tax season every year! If you track your spending, what tools do you use? Do you use an online money tracker – how is it going?