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How do password managers work?

How do password managers work?

Every day, more people are falling victim to cybercrime.

The good news: It doesn't have to be this way. Not when we have so many simple and affordable security practices and services at our disposal.

That's the message from a recent episode of the MSP Zone podcast. And it's a message that can't be repeated enough.

Because the stakes are too high.

It's important to note that cybercrimes and threatware cannot be eliminated. No one can guarantee that you or your business will not fall victim to some sort of attack.

But there are ways you can improve your odds.

A password manager—along with end user security training—is one of the simplest and cheapest tools for tightening your business's security.

What is a password manager?

A password manager solves the pain of generating and maintaining secure passwords. Simply put, it is the best way to store and manage all your passwords. 

We assume that anyone reading this post already has basic knowledge of password managers. But don't worry if the concept is new to you—instead watch this helpful video about password managers before reading on.

Why is a password manager so important?

Some studies report the average person has 100 passwords. If that number surprises you, consider that Dashlane reported in 2017 that the average person had 150 passwords. The company estimated that the number would climb to 300 passwords by 2022.

That's a lot of information to manage.

How does the average person manage so many passwords?


They use weak, easy-to-remember passwords. They often create these passwords by using personal data which can easily be mined. Most people think they're too careful to give out such crucial identifying information which can be used against them—but we give away information more freely than we realize.

To make matters worse, many people reuse passwords. Some even use the same password for every single account. This means that if a password is compromised, it's not just one account in danger—but every account that user owns is now a concern.

Why does my business need a password manager?

We've already covered how the average person is negligent with personal passwords.

People carry their password habits into the workplace. If they're relying on one password for all of their accounts, they'll use that same password for any business accounts they have to create.

Or maybe the employees do make more effort. Maybe they do create strong passwords for work.

But where do they store these passwords?

On sticky notes they stick on their monitors?

In Excel spreadsheets, which can be gained by a would-be hacker?

And how are employees supposed to share passwords for shared accounts? In unencrypted email messages?

This is no way for employees to handle your company's vital information.

Creating a password policy for your business is much easier when you give your employees a password manager. Creating, managing, and sharing passwords can all be achieved through one central program. And make sure to use multi-factor authentication while you're at it.

Is a password manager worth it for businesses?


Cost is a common objection that keeps people from adopting password managers.

A password manager costs on average $4 to $5 a month.

A Netflix subscription costs $15 to $20 a month.

A Spotify subscription costs $10 a month.

Is entertainment really worth two to four times as much as a service that has now become the baseline for managed security in the 21st century?

The costs of the average cyberattack are difficult to calculate. Any dollar amount you read or hear is likely lower than the real number, because many cyberattacks are not reported.

And as Deloitte points out, there are numerous ways a company can suffer from a cyberattack, including:

  • Insurance premium increases (including cyber liability insurance).

  • Loss of productivity and operations.

  • Lost value of customer relationships.

  • Loss of intellectual property.

A password manager is far cheaper than the cost of a data breach. When you look at the whole picture, you can see that $4 or $5 a month is a steal.

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