Best way to sit on cash that won't be used right away
I am looking at ways to increase my investments funds and am willing to take on more risk.
I front load a fair number of categories such as vacation, auto/boat insurance just to name a couple. This in turn means I have nearly 10k allocated but not expecting to be spent for 8-12 months and that money lives in my checking account yielding .05%.
Since I know that these funds won't be needed until a year from now, I am trying to figure out how to store this money in my vanguard account, while still showing the funds are allocated in the category.
Does anyone have ideas on how I could do this?
Remember that accounts and categories are almost completely separate. (The accounts should reconcile, though.) Where you put the money doesn't really matter. The only thing that feels a little odd is that when you move money between a Tracking account and a Budget account, it will ask for a Category for the transaction.
Ally Bank is currently paying 1.6% on their online savings account. That is where we keep our emergency fund and other money that won't be spent until later. There are other bank options as well. You can keep it at Vanguard in their money market account and earn a comparable rate. It won't be FDIC insured but does not carry an appreciable level of risk.
A few people put their investment account on-budget, and just move funds into that account. The fact the value will change behind your back mandates a category to absorb these movements (either direction). Since the timeframe of most savings in YNAB and typical investments are quite different -- let alone the fact principle is not guaranteed -- the vast majority of people do not try to do what you're suggesting. A high-yield (higher than checking at least!) savings account is where most liquid funds are kept. (1.9% is available in a number of places.)
See this article for details about category/account independence, which will be useful regardless of whether you use a savings or investment account. The category balance answers the question, "Can I afford X?". The account balance answers the question, "Can I pay with X account?"
The actual account balance is about $1300 more than the YNAB balance because of appreciation, but I leave that out of the equation in favor of a more conservative approach.
That's an interesting approach. What if it were to go below the YNAB balance? Would you update it then?
Betterment savings account is at 1.83% (https://www.betterment.com/cash-management/). I also recommend Ally but Betterment is higher and both are good. I've noticed Citi has a high paying savings acct too but haven't used it.
To be clear, this is savings, not investment. Zero risk. And that's all you should be taking on for funds used within a year.