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Pick your password, then click Erase, and the drive is ready to go. Give the drive a name, choose an encrypted option under Format (the options are explained here) and choose GUID Partition Map under Scheme. If the encryption option doesn't appear, the drive needs to be wiped and reformatted to be compatible-open the Disk Utility tool in macOS, click View and Show All Devices, then select the relevant external drive and click Erase. You can encrypt external drives with a password from Finder: Just right-click on them and choose Encrypt. After completion you can see the encrypted file with ‘.safe’ extension added with same name or in decryption the original file. While processing it prompts the exact percentage and completion status. Click on ‘Safe Encryption’ or ‘Safe Decryption’. You'll also need to specify your preferred way of unlocking the system disk if you ever forget your password, either through iCloud or through a dedicated recovery key. Select the file you wish to encrypt or decryption. There's a FileVault option there, together with some details about what it does. You can also turn FileVault on (or off) whenever you like by opening the Apple menu and choosing System Settings then Privacy & Security.
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You'll be asked to enable FileVault when you first set up macOS on a new machine, and it's something we'd recommend.
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