Setting up Savings | YNAB
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Setting up Savings

How does a savings account fit into my budget plan?

A savings account is another physical location for your money.  While it's great to have a special account for it, make sure you know what the savings are for. Apply Rule One: Give Every Dollar a Job. Yes, that rule applies to your savings as well.

In order to do this, YNAB strongly recommends that you set up your savings account as a Budget Account and track it in your budget. Once you’ve set up your savings account, you need to decide exactly what you are saving for.  Is the money for emergencies?  Are you saving for a vacation or a new car? Whatever the jobs are for those dollars, create a Category in your Budget and budget those dollars directly to it.

How do I set up a savings account in YNAB?

Step 1: Create the Savings Account.

Click on the Add Account button in the sidebar to add an account in YNAB for your savings account.

Enter the name of the account, the starting balance and starting date for the account. Under account types, select Savings, then click Create Account.

A new account has been set up for you in the sidebar and the initial transaction has been categorized as Income for (the current month). This tells YNAB that the transaction will become Available to Budget.

Step 2: Move to the Budget.

Click on Budget in the sidebar to move to the Budget. Notice that the amount of the starting balance now appears as Income for (the current month).

Step 3: Budget the money where needed.

The money in your savings account needs to be assigned to jobs just like the money in your checking account. Use categories you already have, or create new ones that match the purposes you have for the money in your savings. Either way, the money will wait there in those categories until you spend it and record an outflow.  Learn more about Rule Two.

How do I enter spending from a savings account?

Recording spending from a savings account is no different than recording spending from any other account.

Before recording any spending, always make sure you have budgeted for the expense in the Budget.

Step 1: Add a new transaction.

In your savings account, click on the Add a new transaction button. Enter the date of the transaction and in the Payee column enter the name of the person, place or company who received the money.

Step 2: Categorize appropriately.

In the Budget Category drop-down menu, select the category affected by the spending. For example, if you spent this money on Savings: Vacation enter Savings: Vacation from the drop-down choices.

Step 3: See how this spending affects the Budget.

YNAB has recorded the outflow for you in the Budget Screen. This will reduce the affected Balance in that category by the amount of your transaction. Always keep an eye on how much you budgeted in a category, how much you spent in a category, and on the Balance. 

Remember that you’re using those category balances to make spending decisions!

What if I'm spending money from a savings category from my checking account?

In that case, a transfer will be involved.  Follow the path of the money.

Example:   You’ve been saving up for a new big screen TV and now have enough money in your “New TV” category.  You will transfer the money to checking and will use your checking account debit card for the purchase.

Step 1:  Transfer the money from savings to checking.  You are not buying anything at this point, so the transfer is not categorized.



Step 2: Enter an outflow in checking for the purchase categorizing it to “New TV”.
 

The budget is updated to reflect the purchase from the savings category.


 

Shouldn't my savings master category match my savings account?

Not necessarily.  The budget and accounts have different roles in your financial life.  The accounts keep track of where your money is located, and the budget keeps track of what the money is for.

If you wanted you could keep all the money you are saving for different things in your checking account.  Many people worry that if it’s in checking, they’ll spend it.  However, with YNAB your spending decisions are driven by checking category balances, not account balances.  If you are saving for that new TV, create a category for it.  Any money assigned there is safe from other spending.  If you buy groceries, you check the grocery category.  As long as you stick to this principle you can keep money in any account.  It’s entirely up to you!

Remember, the budget doesn’t care where you keep your money.  You do!  That’s what you have accounts.  The budget just wants to know what the money is for.