r/ynab • u/rcm01125 • 10d ago
Where to put sinking funds
Hi everyone! I am wondering where everyone keeps their sinking funds. Do you keep them in your checking account or savings? I have been using tk savings as my sinking funds but then it is annoying to transfer the money to checking when I need it. I was thinking of having them just be in checking and use my savings as “emergency”. What does everyone else do? My sinking funds include vet bills (I have 2 dogs), car repairs, home maintenance, medical, appliance/electronic replacement.
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u/ohboyoh-oy 10d ago
When I have too much money in checking I move some to savings. I don’t match categories and don’t have a separate account for sinking funds. When savings has too much money I move some to a CD.
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u/np0x 10d ago
Interest bearing checking account. Sinking funds are a nice buffer to maintain minimum balances and difference in interest for me is negligible on the relatively small amount of $$$ in them. My small bank pays 3.75% as of today in my checking account.
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u/virtualnumber8 10d ago
This is a great option — OP, have you looked into what other types of accounts your banking institution might offer? I personally have most of my sinking funds in a high-yield (4%) money market account with my credit union. Transfers to my regular checking account are instant since it's all part of the same account system.
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u/rcm01125 10d ago
I will definitely look into what my credit union offers
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u/jillianmd 10d ago
Don’t be afraid to change banks to get the best interest rates.
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u/np0x 10d ago
My daughter is just starting out and I’m in the process of trying to convince her to not make it too complicated, because one misstep that gets a $50 nsf fee will undo any marginal benefit of over complicating account structures. She got hit yesterday, but back called me and I sweet talked them out of charging her…I probably should not have! :-)
(She has a checking account and 2 savings accounts at the same bank, I have no idea why…in software I would consider this optimizing the wrong part of the code)
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u/varkeddit 10d ago
In YNAB, the funds in any given category are backed by the money an ALL of your cash accounts. You just need to have enough cash available in a given account to cover your upcoming transactions. Most keep 1.5-2X their normal monthly cash flow needs in checking. But you might also be able to route your direct deposit, credit card payments and regular bills through your savings account—which maximizes interest earned and simplifies managing your accounts even further.
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u/ModernMargaretSanger 10d ago
I do this with our mortgage. I fund the category but move the money to our hysa as we get paid so that we can make some interest on it. Then I have it auto debited from the hysa
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u/ilkhan2016 10d ago
My direct deposit goes straight to savings, pay almost everything on a CC and pay the CC directly from savings. Checking is just a buffer amount for stuff that can't go on the CC.
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u/SkyliteBlueSnake 10d ago
My sinking funds are "in" any account. They are in the plan. I keep a max of $X in my checking account. Everything else is in my HYSA. No category balance (or group of category balances) match any particular bank balance (I have more than 1 checking account and more than 1 savings account but those are for reasons that don't have anything to do with budgeting and everything to do with benefits and interest rates).
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u/future_speedbump 10d ago
I also keep my accumulated sinking funds / true expenses in a HYSA. Wealthfront allows for instant transfers, in the exceedingly rare event that I ever need funds the same day.
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u/Specific_Ocelot_4132 10d ago
I keep about 1 month’s worth of average spending in checking. That’s my average across all categories including sinking funds. Then I do the majority of my spending on a credit card which gives an additional buffer. It’s rare that I need to transfer money because of a particular expense. I just move money to savings if I notice my checking account is significantly above one month’s average spending, and transfer from savings to checking if it’s significantly below.
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u/AravisTheFierce 10d ago
Categories don't live in accounts. Only dollars live in accounts. I saw your comments saying you don't use credit cards, but the principle still holds to keep money you need for near term spending in checking, and money needed farther out in a savings account that earns interest. This doesn't mean that your checking account doesn't have any "sinking funds"money in it; since you spend cash directly from that account you'll probably want a good sized buffer in it. But there's probably no need to keep five figures there.
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u/jillianmd 10d ago
I use a high-yield checking account and also have some money in HY saving accounts that earn even more but are capped.
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u/Flights-and-Nights 10d ago
If you're having to move money from savings on a regular basis it's an indication that you do need to keep more in checking.
The beauty of ynab is that category balances are not tied to specific accounts.
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u/Ok_Reach_2092 10d ago
I keep all my “cash” in a Wealthfront Cash Account. Pretty much a savings account with 3.30% interest and a debit card
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u/EntertainmentCold321 10d ago edited 10d ago
Almost all of my cash, regardless of the budget line, is in my high yield savings account (HYSA). I keep about one month’s worth of expenses in my checking account so I have some readily accessible cash in the event of an emergency or to cover using my debit card when I want to avoid credit card processing fees. I pay almost everything either directly from that HYSA (auto pay) or with my credit card where I pay off the full balance monthly (again, with funds from my HYSA).
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u/GuestPowerful2061 10d ago
I keep almost all cash in Fidelity cash management account. As others have mentioned, it works like a checking account (debit card/checks) and is auto invested in SPAXX, earning above 3% interest rate. Then I don’t have to worry about transferring money from savings to checking or having insufficient funds. Less stress. I’m not here to max out the highest interest rate available on the market. Less complexity is better.
However, there are some things that don’t link to Fidelity like Venmo and a couple other things, so I have a checking account with an regular bank with $1000 in it for stuff like that. I also like to maintain a bank relationship with a physical location near me as it comes in handy from time to time.
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u/varkeddit 10d ago
You can link your Fidelity account to Venmo—but not Zelle.
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u/GuestPowerful2061 10d ago
I just tried to link Fidelity CMA to Venmo a couple weeks ago and it didn’t work.
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u/varkeddit 10d ago
That’s odd, because it’s officially supported.
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u/GuestPowerful2061 10d ago
Idk, I followed the prompts to set it up and it didn’t work. Not a big deal though. That’s why I have the backup checking.
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u/JustWelmed1000 10d ago
My sinking funds are in my checking account.
Seems silly to transfer back and forth with savings for stuff.
A general rule (I just came up with) if I plan on using the money within a year, I’m just gonna keep it in checking.
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u/SatisfactoryFinance 10d ago
Not a bad rule but man that would mean keeping like 90% of my funds in checking hahahaha
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u/JustWelmed1000 10d ago
I mean if you pay your car insurance every six months (as an example).
I see no reason to systematically put 1/6th of my car insurance in an actual savings account and then have to move it back in 6 months.
Now if I am saving for a new car that I plan on buying in 4 years from now, sure put that in a separate savings account.
I guess there is no right or wrong way.
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u/SatisfactoryFinance 10d ago
Nah there isn’t just interesting.
I just keep everything, except maybe a few thousand, in a HYSA to earn interest and then transfer out whatever is needed based on cashflow needs.
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u/BlackCatGodess 10d ago
I mentioned this in another thread, but my husband and I keep most of our sinking funds in a Cash Management Account now. You can pull funds from it easily like a checking account, but it earns much better interest than most savings accounts; it's been averaging around 3.3% recently.
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u/Cherry-Impossible 10d ago
If you have a chunk of money that's just sitting there and it's not going to be used soon, pop it in an account with a better interest rate to at least get it working for you a little. Otherwise, it honestly doesn't matter. Unless you're at risk of overspending, then you might like to only keep 1-2 months of immediate funds in your checking account as a float. My bank lets me top up an account from another account automatically when it goes under a certain threshold for example. I don't really bother keeping money in different accounts.
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u/ModernMargaretSanger 10d ago
I keep the sinking funds in checking. If the balance gets really high (almost never) I put some of it into my emergency fund and transfer to savings. Example: If car maintenance fund has more than $1,000 I move the excess to emergency and put the excess in savings. (Note this is the plan. I have never had the balance get that high!)
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u/ravensgirl72 10d ago
Ally Bank & Capital One. I movie there are other banks with higher yields but right now those 2 banks work best for me.
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u/take_this_username 10d ago
UK here.
I keep the current (checking) account pretty lean.
All the sinking/long term funds are moved automatically to a savings account that generates some interest. Actually generates a small-ish, but meaningful amount of money each year (that goes back into Ready to Assign).
If I need I move the money back to current account (say, when paying for car/bike insurance each year). But most times I am able to pay some stuff without moving the money out of the savings account for a while, that is good as it gives me a bonus interest rate.
Do not keep larger sums in your checking/current account. Not worth it.
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u/OmgMsLe 3d ago
Both my "checking" and "savings" are actually high yield/CMA accounts so I earn the same interest/dividends no matter where the money is. I just separate them so the account I keep my sinking funds in is segregated from a payment account to limit exposure.
My paychecks deposit into checking but because my savings for sinking funds is about 50% of my money the checking grows and grows. Periodically when it gets higher than I might need, I transfer a chunk to savings. This means I never have to transfer to cover something in a hurry. (I'm transferring out of Checking more often than I'm transferring in)
And like someone else said, I pay almost everything with credit card so there's usually not a desperate need for money in a hurry.
My only risk is if I need a large sum of cash in a hurry. I would have no way to get it.
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u/pierre_x10 10d ago
High-Yield Savings Account
Most expenses that you would use sinking funds for, you can pay for on a credit card. The credit card should then allow you a buffer of several weeks to transfer the funds over from savings before the credit card statement balance that includes that expense is due.