Transfers to Savings Accounts
I need a little help understanding how to manage and budget for some of my savings. I have a bank checking account that my salary flows into. I also have some separate American Express high interest savings accounts for long term savings; one for a roof fund, one for house repainting, one for vacations, etc. Money will sit in those accounts for years before being spent. I like to keep them separate for the higher interest and to keep them off my spending radar. I just started with the new YNAB this month, Jan 1st. I budgeted the current balances in these accounts into their own budget lines, one for vacation, etc. I also budgeted my pay for this month as it came in into my various budgets, groceries, gas, etc. Every dollar has been budgeted and has a job. I forgot that I have automatic transfers setup for every month on the 23rd to the Amex savings accounts, $20-$40 each depending on the account/goal. YNAB sees the transfer into the Amex accounts but every dollar in my checking account is budgeted to other things. Do I need to budget for these transfers each month? My checking account would now be short right?
I understand the separate checking accounts for all your goals. When you're not running a detailed budget, it's a really good way to keep finances straight and save for various goals.
YNAB doesn't particularly care about accounts though, beyond whether they have a positive or negative balance. If you noticed when you first set everything up, the money from all of those savings accounts all landed in TBB along with your Checking. This is because YNAB considers every dollar in every account to simply be a dollar that needs to land in a category somewhere.
Do you need to budget for the transfers?
Technically no. Transfers between accounts don't get categories attached to them, because there isn't any money entering or leaving your budget. The money is just changing it's residence from Checking to Savings.
However, if you want to keep your category balances matching your account balances, then yes, you need to budget money to each of those categories equal to the amount of your monthly transfers to each account.
My checking account would now be short right?
Another complicated answer here. Based on the story you told, your checking account currently has some amount less in it than the sum of your categories that you don't have savings accounts for. If your checking account doesn't go negative though, is it really short? Another way of looking at it is that you're maximizing your interest income by having the money in the high interest savings accounts instead of the checking account, despite it not being categorized for one of your savings goals.
Thank you for the detailed response. I think that my checking account could actually go negative given enough time if I don't budget for these transfers. I'll give a very simplified example:
I have a total inflow of $1000 per month.
My mortgage is $1000 per month paid on the 25th.
My checking account has the $1000 inflow and all of it is budgeted to the mortgage.
An automatic transfer of $50 to my Amex savings occurs on the 23rd.
My checking balance is now $950 and my mortgage payment is short.
I understand what you are saying about it possibly not going negative as there are other long-term categories in my budget that just build up month after month in my checking account but given enough time I will eventually spend that money but a portion of it has been moved away to my Amex savings. It would be simpler to just keep everything in checking account but some of these Amex savings accounts have high balances for years. For example, there is currently about $13k in these savings accounts for projects that won't mature for another 10-15 years, like the roof. I will need about $25k for a new roof (tile, big and expensive ) in about 15 years. I'd rather make 2% per year interest than .02% over those years. Does this make sense? Am I still missing something? To me it seems like transferring money into an emergency account but not budgeting for an emergency account .
Are your savings accounts on budget? If so good. You have to “budget” for these transfers insomuch as in your head you are adding $40 to the roof category each month by doing the transfer, therefore you budget should reflect that you are adding $40 to that line item each money. Does it matter if that $40 is in your checking account or savings account? As long as they are both on budget accounts, it does not.
You don’t need multiple savings accounts with YNAB to keep track of multiple long term goals because categories are what track these goals in YNAB, not accounts. In your example, you only need one savings account but three different categories, Roof, House Painting, and Vacations. As far as budgeting for them, yes, you need to budget the amount you want to add to each category each month. So again with your example, you need to budget $20/$40 for each category depending on which category you’re budgeting for.
The way you phrased the question was wrong. You’re not budgeting for the transfers, you’re budgeting for how much you want to add to each category which happens to match how much you’re transferring to savings for each. The transfers themselves don’t have a category because you’re just moving around the funds in your budget from one budget account to another.
You save money in YNAB by budgeting money to a category and then not spending it. The account the money is in doesn't matter.
Read this over and over again till it sticks:
@jbill While I agree the advice the others are giving is sound, I think you and I are alike in the “need” to have this mostly out of site out of mind... not to mention this saving account earns high interest. Here is my personal “hack”
1. I would create a TRACKING account called “American Express High Interest Savings”.... Set the balance for today’s balance
2. In the Budget, Create a CATEGORY called “Awaiting Auto Transfer”.... move the Money from TBB to this category
4 Create a FUTURE TRANSACTION that happens on the 23rd of the month that moves the money FROM the budget “Awaiting Auto Transfer” TO the tracking account “American Express High Interest Savings”
5 Keep your bank auto transfer as is. The above just helps you record it in YNAB
Yes there are some steps here... but they are really fast. And now you will be able to reconcile both accounts.
Also when interest comes in, go to the Tracking Account and create a transaction payee “Interest Earned” to (Account) the Tracking account, inflow $$
I hope this helps
I think you've got great advice but most of it was talking about the transfers. I want to emphasize how to save with YNAB. If you want your funds for your projects to grow by $20-$40 per month, you need to budget $20-$40 per month to the corresponding categories. It doesn't mean you budget the transfer as it is the same whether you transfer the money to other accounts or not. It means: "I want to reserve $20-$40 per month for projects X, Y and Z". Just like what you do for your mortgage/rent, groceries etc.
And to save the money: don't move the money out of the categories :)
Thank you all for the very helpful replies.
To summarize for others that find this thread in a future search:
Yes, you MUST budget for increases in your savings accounts if you are continuing to increase your savings. You do NOT need to budget additional funds if you are just moving already budgeted funds from one account to another. This sounds kind of obvious when you reduce it to the fundamentals but a lot of people in this thread just get it wrong or don't seem to understand the difference between a transfer and adding money to your savings.
In my specific case, I MUST budget $20 from my monthly salary to my Roof Fund AND I prefer to also transfer $20 from my checking to high interest savings.
I was wondering the same thing, happy to find this post. When I'm saving for a goal, I like to think about that money as already spent. I shouldn't budget money that is effectively spent. Therefore I decided to remove my savings account as an account and to convert the transfers to the savings accounts into categorized spendings so I can budget for my particular goals. Unfortunately, you can't change the payee from a transfer to a saved payee under a bulk operation so I had to edit each line item separately, then delete the savings account entries along with the account.