'Save the pennies' savings account
I'm looking for advice on how to manage a savings account I have with my bank. Several banks in the UK offer this service, but I couldn't find any advice here about how to use it with YNAB philosophy.
My current account provider is set up so that when I use my debit card for a purchase, it rounds the amount up to the nearest £ and puts the remainder into a savings account.
I.e. I purchase a coffee that costs £2.40 using my debit card. The bank will transfer £0.60 to the savings account.
The transfer is done at the end of the day for the total value of purchases I made that day that were rounded up.
In YNAB, I have both my current account and this savings account set up. I enter these transactions as transfers between the current account and the savings account. However, I am not sure how to 'use' the money in the savings account i.e. how to budget it in YNAB. The amount to be budgeted doesn't change - the total value in my accounts hasn't changed, just where the money physically is held.
Because these saving transactions are random and based on my purchases, it varies a great deal - some days I don't have any savings being transferred at all, some days a few pence, some days a few pounds.
Any ideas how best to manage this account in my budgets?
At the moment I have a category called 'Save the Pennies' that I always try to make equal to the balance in the savings account. I do this by moving the budgeted amount from other categories until it adds up.
My advice would be to disable this service. It creates lots of extra work in YNAB with all those extra transactions. The money being transfered is already in your budget and assigned to categories based on your priorities, so you don't need an external force moving money between your accounts for no reason.
In YNAB, you save money by budgeting it to a category and then not spending from the category. The account the money is in doesn't matter.
Honestly, if you consistently use YNAB, you don't need the "save the pennies" account. That sort of account works best for those who spend money based on their bank account balances and need to hide money from themselves so they won't spend it. If you're using YNAB and tracking all the pennies anyway, you're just creating extra work for yourself.
If you really need that account, you'll want to record each transaction as a split transaction. For example, for your £3.00 coffee purchase, you'd create a split transaction with £2.40 categorized to your food category and the remaining £0.60 as a transfer between your checking and your save the pennies savings account. Assuming the savings account is on budget, there's no money entering/leaving your budget, so there's no need to categorize. As a second, manual step, you'd want to have a "Save the pennies" category in your budget that you adjust to match the amount in your savings account.
It sounds like a whole lot of unnecessary work to me. You're already tracking your pennies in YNAB, and you can save by having a savings category and budgeting more money there. You don't need a separate account and unnecessary transfers to do this for you.
I have one of those accounts but thankfully only on a Revolut account that I use sparingly. The Revolut account is used for small foreign currency payments and is rarely used. I set up a savings vault to see how they work but thankfully it's not a key part of my budget otherwise it would drive me YNAB crazy. As the others have said, the accounts don't have any benefit if you're using YNAB correctly.
I've played around a bit with the various savings options in Revolut to see how they affected my psychology and have concluded that as expected they are of no benefit to me. I might have found them helpful pre-YNAB but now they would just be an administrative hassle if they were on my main account. As it is I rarely have a balance of >£100-£200 on Revolut for more than a few days so I maintain a single Revolut account in YNAB which is the sum of £account + best guess of £ value of €account + sum of savings vaults. Easy for me to do that on something that is a very minor part of my budget. Even so I am spending that money down and will now only spend on it if I need to pay in foreign currencies. If it's on your main bank account, then unless you really think it's helping you save over and above what you're achieving with YNAB then I'd disable the feature.
I've read one of your comments above two different ways, so just to clarify. If you buy 2 coffees in a day at £2.40 does it transfer £1.20 to your savings account (i.e. 2 x (3.00-2.40) or £0.20?
Hi, Linguistable . If it works for you, I think that's great. 😊
If I understand this correctly, I see each of these transactions as a split between purchase from a category and transfer between accounts. Your £2.40 coffee purchase would be entered as some thing like:
Transaction from the "Save the Pennies" bank account
Split category, total outflow £3.00
- First line of split: Category "Coffee", outflow £2.40
- Second line of split: Payee "Transfer to Savings Account", outflow £0.60
So you don't need a category for the sweep of 60p to your savings account, just a transfer between accounts in YNAB for that part. This reflects what's actually happening in real life. £2.40 is being spent and leaving your life. £0.60 is being moved from Save the Pennies account to your Savings account.
I've tried to paste it as an image below but don't know if I'm doing the image correctly.