One of the most common questions I receive as a Mac technician is: “Should I back up my data using Time Machine with an external hard drive, or using iCloud?” The answer is not a simple one. Both methods have different advantages and disadvantages.
When you back up your data using Time Machine, you are copying it from your computer to an external storage device that you own. Often, this device is located in the same physical location as the computer itself. If the device is a hard drive, it has the potential to randomly fail or become damaged by a fall or an impact. When you store your data into your iCloud account, you are sending your data away to be stored on a server in one of Apple’s data centers, hundreds or thousands of miles away.
Deciding on a backup strategy is similar to deciding on where to store your money. Using iCloud is like storing your money in a bank account, and using an external hard drive is like storing your money under your mattress. If your money is in a bank account, it is guaranteed to be safe no matter what happens to you or your home. If your home is destroyed by a fire or a natural disaster, your money will remain in the bank account. However, if the bank fails or goes out of business, which has happened before (pretend the FDIC does not exist for this analogy), your money will be lost. If your money is stored under your mattress, you are guaranteed to keep your money no matter what happens at the bank or anywhere else. However, if your home is destroyed, the money will be lost.
The matter can be further complicated by issues like the fact that iCloud does not automatically back up all of the data on your computer, and is therefore not a true backup solution. If you use iCloud Photo Library, your pictures are automatically backed up, but everything else needs to be manually stored in the iCloud Drive folder on your Mac, so if you forget to save a document there, it is not backed up. Also, with only 5GB of free storage, this can fill very quickly and you will likely need to pay a monthly fee for additional storage. Finally, if you forget your iCloud password, and are unable to reset it at iforgot.apple.com, you can lose access to your data.
Keep in mind, the more important your data is, the more backups you should keep of it. Using iCloud and Time Machine together is even better than using either one.