Investing Savings

Okay.  I start a category to save for something. After a while I have accumulated enough so it makes sense to transfer some the savings to an investment account so it can grow.  YNAB treats that as an expense to the savings category. How do I handle that?  I have not incurred an expense yet the Reports and Accounts show it as such. Ideas? Thoughts?

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  • Money leaving your budget will look like an expense. That's why it is recommended that all savings accounts be part of the budget.

    But you are talking about investing the money. So, before we talk about how to handle it, let's discuss whether or not investing the money is actually a good idea.

    What are you saving for? What is your time horizon for using the money? Does all the money have to be there when you want to spend the money, or can you put off spending it adding more until you get back to the total you need?  The amount of growth you get from investing may not be worth the risk of not having the money when you want/need it.

    Common rule of thumb is that investing money is for time horizons of 10+ years, because a crash and recovery could take that long. If on the other hand, you can put off spending the money if you don't have enough at the time you plan on spending it, then perhaps investing is okay.

     

    But yes, as I said above, money leaving your budget will look like an expense. That means you won't be able to track how much you've accumulated toward your goal, especially if you do this for more than one category.

    Investing money you are saving does not really work well with YNAB in general. There is a way to do it, but it's rather Masters Degree YNABbing, and you really need to have way more money in your taxable brokerage account than you plan to use for your savings goals for it to safely work.

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  • If you only want to see expenses that you are actually spending in your reports, then you can exclude categories from the reports.  E.g., I have a "Savings" category group that I deselect when I want to inspect my actual spending, although I usually leave it selected so I can get a sense of my savings rate.
     

    As for the actual mechanics for determining how much to save each month, if you don't already have one, you could set up a spending goal by date, or calculate how much you need to save per month to achieve your savings goal manually and set up a monthly contribution goal.

     

    But if this is savings for a fixed amount to be spent at a fixed date, or something you intend to spend within a year, then it indeed really shouldn't be invested due to risk of losing value.  On the other hand, I would invest it myself in a (relatively) safe bond fund if it was a medium-term goal (say, about 5 years in the future) that doesn't have a firm commitment (or just spend from my general investments without a separate savings goal if I can push back the spending indefinitely).

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