Additional savings account
I have one savings account which I have separated in my budget to actual savings then savings for things such as car tax, car ins, holiday, birthdays etc. What I'm wondering is would it be sensible to open another savings account purely for my savings and have the existing account for the savings which will be spent.
Read this article: The Relationship Between Your Budget & Your Accounts: It's Complicated. In YNAB, money is "saved" as soon as you assign it to a category and then don't spend it. The account is not relevant. It's like, if you have a $20 bill in your right pocket and then move it to your left pocket; you still have a $20.
I'm not saying don't have a savings account. I have multiple savings accounts but that's because I use them for sign up bonuses or high interest rates and to spread my money around so it's not all in one place as a general security measure. It has nothing to do with the "purpose" of my money though. None of my account balances match any of my category balances (or any grouping of categories). I determined that I need on average $X in my checking account to cover all payments in a month (mortgage, HOA, credit card bills, utilities, etc) and keep a certain amount more than $X in the account. Everything else gets sent off to one of my savings accounts to earn interest.
That is a personal choice. Personally, I like having as few accounts as possible and always look toward utilizing an existing account rather than opening a new one.
The money I have on budget for savings, that will be spent in the near future, I simply keep in my checking account since most transactions come out of there. It isn't worth it to me to keep moving money back and forth between checking and saving.
For longer term savings, like my savings for a replacement vehicle, which I don't see needing in the next year or two, I might put into a separate savings account for a few more interest dollars. But only after I have enough in my checking to cover anything that might come up in the near future.
And then there's yet another option:
I keep my chequing account over-funded by at least $1,000 more than I anticipate actually spending. On the first of every month my chequing account has a balance equal to: my average/typical monthly spend + $1,000 + any large anticipated/scheduled expenditures I foresee in the next six weeks. If I don't have that amount in chequing, I transfer what I need out of savings to get that balance. Anything above that amount on day # 1 of a new month gets moved to a savings account for the better interest it will pay.
I chase promotional interest offers, so I have more than one savings account. I move qualifying lumps sums (unrelated to any category or combination of categories) around to get the premium interest rate offered by whatever bank is offering the best. I keep my short-term savings (funds that will be spent within the calendar year) and my emergency funds (money I hope to never spend) liquid and unrestricted and not invested.
Mid-term savings: funds I'm saving for a special trip or new furniture or a replacement car, I've chosen to not invest in riskier things, but I don't mind tying them up in longer-term savings vehicles that give me a bit more interest. I've moved my car savings into GICs (that's Canadian for CDs). I budget monthly and then buy a new GIC once a year. Although the GICs are purchased in different years, they all have the same maturity date, so I will have a nice lump sum to go car shopping in 2022.
I agree with others that this is personal preference. Personally, I have a "Long Term Savings Account" and the balance in that account matches the balance in the budget category. I also have a "Monthly Savings Account."
I call this one "monthly," because it holds money that I allocate to specific categories every month for different things (i.e. auto expenses). I budget money to this and other irregular expense categories in my budget every month. The "Monthly Savings Account" also holds money I make this month, but will budget next month (i.e. my buffer).
If I have to spend money on auto expenses it hits this category in my budget, and I transfer an amount from the monthly savings account into my transaction (checking) account to cover it. I also transfer my buffer to checking at the beginning of the month, so I can budget for the month.
This way things like my emergency fund don't get touched because it is sitting in my long term savings account.
This is the way I do it, but as I said, whatever works for you.
This is just extra unnecessary work. Just put what you don't need in your primary account into the savings account. The only reason to have multiple savings accounts isif you have a better use for some of the money. If it's all at the same bank earning the same amount of interest, it's just extra work for no reason.
To be fair, not everyone is ready to let go of budgeting by account the moment they find YNAB. For some (like me) it takes a while for an awareness of a different way to sink in and to gain a level of confidence with the software as well. My account structure had become a tangled web of crazy, and I really, really needed to let go of budgeting by account. My family even teased me and made fun of how quirky I was with money. Worse, it was making me miserable and anxious. I began letting go of budgeting by account and matching categories to specific accounts about 5 weeks into using YNAB.
The Epiphany: There was a week early in my use of YNAB where I logged into numerous accounts at 2 a.m. in order to transfer less than a dollar from each, all in an attempt to keep account balances in line with category balances, and at the time e-transfers cost me in service fees if they exceeded a certain frequency. And then I tweaked my budget a bit, moved funds around, and found myself staring in horror at the category and account balances that now didn't match, again. I realized I couldn't keep logging into accounts and moving less than a dollar, and I remembered the forum advice. I made the deliberate decision to consolidate savings accounts and just let go.
I realized that I could safely rely on YNAB to separate the money by purpose while letting it sit in whatever jumbled combinations at the bank, in cash, in gift cards, and it was such a relief to let go of budgeting by account.
I did initially simplify by closing accounts. In my current budget (four years later) I actually have more accounts right now (a temporary situation) than when I started using YNAB. Since building up some liquidity -- YNAB is so efficient at increasing net worth -- I've made a game out of chasing promotional interest and bonuses on new savings accounts. I easily move lump sums around between banks in order to meet the minimum required to qualify for a promotional interest rate, or I move the bulk of my money to the account with the (temporary) highest interest rate. It's become a game that makes money and doesn't limit me in my behaviour.
Well, here I go...
JoeDid you ... are missing the point. This is about trying to manage a separate savings account at YNAB and match it to categories.
This was not the OP's point initially, who didn't mention matching savings account to categories until later on in the thread. I don't do that anyway: I hardly ever look at those specific categories now that they are all established and transfers to/from them "automatic" except for when I see the funds automatically allocated for an upcoming expense in a new month.
If you prefer something more concrete rather than an analogy, @HappyDance explained in the other thread about this why separate savings and matching accounts to categories eventually trips people up and makes using YNAB unpleasant.
Again, you're talking about matching categories. I saw @HappyDance 's post and I have always respected her opinions. What I can't do, however, is keep $1000 extra in my checking account as a buffer there. I don't have that luxury. Also, if I implied I that using YNAB is unpleasant, I didn't mean to. I love using it, and the way I use it works for me.
you can tediously move money back and forth between your accounts.
This is another assumption on your part. There's nothing tedious about it for me. I have a Future Expense savings account that holds funds for long-term expenses, something that YNAB taught me to think about, and which I implemented a year ago. (The first item I set up was for YNAB renewal in December.) It's an interest-bearing account, whereas my checking account isn't. Transfers from my checking account to the Future account are done monthly and are automatic, both in YNAB as scheduled transfers and at my bank.
Likewise, the five months a year when I move funds back to the checking account to cover the expenses: they're scheduled transactions in YNAB and automatic transfers at my bank. I do nothing but watch them happen and there's nothing tedious about that.
In another post @HappyDance wrote she has "made a game out of chasing promotional interest and bonuses on new savings accounts. I can easily move lump sums of money around between banks..." for various reasons that are beneficial to her, and "It's become a game..." Why is that a game, and what I do tedious?
I'm not sure why I'm even bothering to defend my use of YNAB to others whose financial situation is probably very different than mine. My method works fine for me, is not unpleasant, and is far from tedious, but is fun to watch happen.
I'm not someone who is averse to learning new ways to do things: the fact that I've shelled out $75+ for YNAB itself is an example of that. In the year I've worked with it, I've gotten to the point where I'm basically bored: there's so little for me to do, other than approve transactions. I wish there were more.
I still don't get the bicycle analogy, (apparently I have a scooter) but thanks for trying.
"matching accounts to categories" more broadly is also thinking of an account as being for xyz kind of money. This is matching the purpose to the location. So if you (both generic "anyone" and you specifically) have an account that is for "future expenses" and that's how you think of it, that falls under the umbrella of having not fully embraced account/category independence. Your transfers back and forth might actually be unnecessary depending on what your cashflow looks like. For example, if in the month that you need to buy the thing you are saving up for you don't transfer any money out to the "future account," it's possible you could just spend money from your checking directly on the thing without moving money back into checking.
If the location of the $$ doesn't matter (everyone here says that: right pocket/left pocket, etc.: doesn't matter) why are you telling me I shouldn't keep the $$ in an interest-bearing savings account? Are you saying I should keep it in my non-interest bearing checking account instead? To avoid transfers?
I pay the expenses from my checking account, not from the Future account. Transfers from it to checking, both in YNAB and at my bank, are made automatically, exactly when needed, without any intervention on my part, as are payments out to the providers when the bills are due.
I assure you, I'm not being contrary on purpose. I don't see where I am, in your estimation, failing in my application of YNAB.
Please keep in mind that everyone's financial (and in my case, health) situation is specific to the individual.
Your method has you auto transfer $200 to savings each month, and then the month of the quarterly bill, you transfer $150 back to checking to pay the bill. When in actuality, because you receive more extra income than you need to pay that bill, you can pay that bill easily in the month it is due without ever making the transfer back from savings
You are assuming a lot. I really don't want to belabor this. Thanks.
Semi-related / attempt at finding a middle ground in this debate:
I operate a joint YNAB budget with my wife, but I'm the primary manager of our family finances and am more steeped in the YNAB methodology. She still clings pretty hard to the budget-by-account-balance mindset, despite my best efforts.
My tactic is to keep our checking account balance as low as possible -- just enough to meet our cashflow needs -- and park most of our money in CDs and savings accounts that my wife does not frequently monitor. It reinforces the feeling that we're "poor" and constrains those spending impulses of having a big pile of cash burning a hole in your pocket. Out of sight, out of mind...
If you're all-in on the YNAB methodology, you shouldn't need that extra reinforcement -- your category balances should guide your spending, not your account balances. But old habits die hard, and some users might never fully embrace the YNAB way. So by all means, adopt whatever combination of tools and techniques works best for you and helps you achieve the best outcomes!
** With that said, I strongly discourage anyone from attempting to synchronize account balances with YNAB category balances. As others have pointed out, that's hugely time consuming and doesn't provide any real benefit.