Putting Your Money Where Your Mouse Is

By JOSEPH DE AVILA

(See Correction & Amplification below.)

During graduate school, Audrey Troutt managed her expenses with an Excel spreadsheet. After graduating, she wanted an easier way to handle her bills and to track her finances. "I don't want to calculate an elaborate budget," says Ms. Troutt, a 26-year-old software engineer from Philadelphia. "I don't need that. I just want something simple."

Now Ms. Troutt manages her finances entirely online, using Rudder, a free Web application. It analyzes her daily and monthly expenses and sends email updates that detail how much money she should spend per day. She likes the application for its simplicity and intuitive Web design, she says.

Like many people in her generation, Ms. Troutt skipped traditional financial-management software, such as Microsoft Money and Quicken, and instead conducts her financial life over the Internet. Thanks in part to the popularity of e-commerce sites such as eBay Inc. and Amazon.com Inc., consumers are growing comfortable with putting more of their financial life online. Indeed, about 40% of U.S. households now bank online, up from 27% in 2003, according to TowerGroup, a financial consulting firm.

Financial-service sites are increasingly confident that young people -- those raised on Facebook and iTunes -- will be drawn to their free, simple, Web-based money-management applications. Leading the way are Houston-based Rudder, as well as Thrive, a New York-based financial-management site and Mountain View, Calif.-based Mint.com.

Even some traditional financial institutions are going beyond online banking and experimenting with new ways to reach customers using social-media features, such as blogs, communities and wikis, which are Web pages that allow people to collaborate online. About 15% of nearly 70 financial institutions surveyed have added some of these features to their sites in 2008. A number of the sites have a dedicated section that allows members to exchange information through forums or blogs, according to a recent report by Corporate Insight Inc., a New York market-research firm.

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PNC

A detail of the PNC Bank's 'Virtual Wallet' shows a schedule of expenses.

PNC Bank, a unit of PNC Financial Services Group Inc., launched a new checking- and savings-account service aimed at Gen Y called "Virtual Wallet," with a flashy Web site and online tools to manage money. West Bancorporation Inc.'s West Bank has partnered with a Des Moines, Iowa, start-up called SmartyPig that takes a social networking approach to savings accounts by encouraging people to share their savings goals with others. And Wachovia Corp. provides basic customer service using Twitter, a blog site where users communicate in short messages.

The Web-based sites are hoping people will use their services to aggregate all aspects of their finances -- tracking expenses and income, as well as credit cards, bank balances and retirement accounts. TowerGroup estimates that about one million people have accounts with an online personal-finance manager.

Mint, one of the more popular of these sites with more than 650,000 registered users, allows people to track where they spend their money and pool their credit-card and bank-account information. And it recently added investment-tracking and analysis tools, so users can see how their investments are faring against benchmark stock indexes. As the economy has slowed, more users have been exploring the "Ways to Save" feature that sorts through thousands of credit-card and bank-account offerings and makes recommendations. Banks don't have to pay to be listed on the site, but some banks will pay Mint a referral fee if the customer signs up. Because of credit tightening and the weak economy, searches for credit-card offers at Mint spiked by about 100%, notes Aaron Patzer, founder and chief executive.

The recession has also prompted more members of Thrive to seek advice, such as how to accrue emergency funds, says Avinash Karnani, Thrive's chief executive. Thrive lets users aggregate information on their checking, savings and credit-card accounts. Users can also input their earnings, and Thrive will analyze their expenses and set up budgeting goals. A big chunk of Thrive's targeted demographic are people in their 20s and 30s who aren't very financially savvy but want to learn how to be, Mr. Karnani says.

Jenny Rose, a 30-year-old freelance film and television producer from New York, recently signed up for a Thrive account. "I have a history of forgetting to pay my bills," she says. "It hurt my credit report."

Now Ms. Rose says she tracks her spending more closely. And on a recommendation from Thrive, she recently transferred her Washington Mutual Inc. savings account to Citigroup Inc., where she receives a higher interest rate, she says.

The easy navigation and simple design employed by these online sites can now be found on the banking sites.

PNC Bank's Virtual Wallet has an interface that lets users manage their accounts and gives customers a variety of online tools, such as calendars and savings wish lists. PNC developed the service to attract customers between 18 and 34 years old, says Mike Ley, vice president of e-business for the bank. "They have different expectations of online services," he says, and they want a robust visual site.

PNC customers can adjust their finances with the "Money Bar," which separates their money into three segments: money in their checking account allocated for bills, money they can spend and the money they are saving. So far 27,000 PNC Bank customers have a Virtual Wallet account.

SmartyPig, partnered with West Bank, is targeting 20- and 30-somethings with social-networking features. Here, users can set up high-yield savings accounts and, if they like, share their savings goals via email, by posting on social-networking sites like Facebook, or through the SmartyPig Web site. It also lets friends and family members contribute to the account -- set up for a wedding, for example -- using a credit card or an automated clearinghouse transfer from their bank. It currently offers an interest rate of 3.9% and is FDIC insured.

"A social aspect of savings was missing," says Mike Ferrari, who co-founded SmartyPig with Jon Gaskell.

Jeremy Bingaman, a 30-year-old Web and graphic designer from Des Moines, Iowa, recently opened an account with SmartyPig. "I thought it was a really neat idea to bring in online savings and the social-media aspect," Mr. Bingaman says. His current goal is to save $3,000 for a trip to New York next year. He recently started telling family members to make a deposit to his SmartyPig account instead of giving cash as a Christmas present this year. Moreover, SmartyPig users can get customer service over the phone or even using Twitter.

Wachovia is another company that has been trying out Twitter. The bank had been watching the growth of social media and wanted to find a way to get involved, says Pete Fields, Wachovia's e-business director. "We liked the idea of starting with an online social community that was young and growing," he says.

So far Wachovia customers have been using Twitter for customer service. Wachovia employees monitor the site for questions and try to provide answers so other users can read them. If the customer needs to discuss sensitive account information, the Wachovia employee tells the user who they can contact for additional help, Mr. Fields says.

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