There’s a solution to this. Encrypt the sparsebundle images.

• Set up Time Machine to back up to an AFP drive. I don’t think this will work with a local hard drive.
• Let Time Machine start backing up, then stop the back up. This will have created <machine_name>_<mac_address>.sparsebundle on the AFP drive.
• Disable Time Machine.
• Open a Terminal and run these commands:
$ cd /Volumes/<AFP Drive>/
$ mv name_mac.sparsebundle name_mac-old.sparsebundle
$ hdiutil convert -format UDSB -o name_mac.sparsebundle -encryption AES-256 name_mac-old.sparsebundle
  It will ask you for a password. Type in a password you won’t forget.
• Double click the sparsebundle in the GUI. You will be prompted for your password. Type that in and tick the “Remember password” check box.
• Open /Applications/Utilities/Keychain Access and find name_mac.sparsebundle. Right click it and select Copy name_mac.sparsebundle.
• Select System Keychain on the left hand side of Keychain Access and paste it in the main area. Allow this action if you are asked. Remember to lock the System Keychain when you are done.
• Time Machine should not have no problem backing up to the encrypted volume. If everything works as planned, feel free to delete the name_mac-old.sparsebundle

Your backups are now encrypted. How this all pans out in a restore, I don’t know. I reckon a fresh install + the migration assistant is the way you’ll have to restore your computer upon disaster.

Now that you’re all secure, don’t forget those passwords.

If you’re lacking a Time Capsule for yourself, you can get one from MacMall for cheaper than Apple sells them.