There was recently a rich exchange of long emails on the MoneyWell mailing list on about how to deal with savings in MoneyWell. Thanks a lot to Blair Watkinson and Kevin Hoctor for participating in this enlightening discussion.

As three solutions seem to have emerged, all with their pros and cons, I'm going to detail them here. If you don't know what is MoneyWell, now may be a good time to skim the previous post I've written about it, or go watch some tutorial videos.

What are Savings?

In the following, I'll use the word "savings" for money that is put away for future unplanned expenses. The keyword here is "unplanned": if I'm putting away money to buy a new computer in 6 months, this is not savings. The reason planned expenses should be kept separate from savings and from each other is to make sure each one of them is accounted for.

I don't make any assumption about where savings are kept: they can (and often are) in a special savings account, they can be kept in a checking account, or they can be hidden in a fat envelope under the mattress!

What I mean by "tracking savings" is the capacity to tell at a glance how much is saved, and have a history of money saved or removed from savings.

Savings as Expenses to a Savings Account

The first approach to savings has a very big advantage: it's the one recommended by Kevin Hoctor, the author of MoneyWell! It's also very simple. It requires a savings account and a bucket for savings. It is also good to allocate some money to this bucket in the Spending Plan, to remember to save it away.

Let's assume you have allocated 200 € for your monthly savings. At the beginning of the month, when allocating your salary, you have 200 € available in the savings bucket. You then transfer this money to your savings account, assigning the transfer to the savings bucket. This result in "spending" the 200 € for savings, bringing back the bucket to 0 (there is no more money planned to save away).

If you have some money left in a bucket you want to save, the process is very similar. First you flow the money from the bucket to the savings buckets (the simplest way to do so is drag the bucket onto the savings bucket, then specify the amount to flow), and you then have more money to "spend" on savings, which you can transfer away as before.

If at some point you need to spend some saved money, for instance if your car breaks down unexpectedly, you should do the following. First, create a money flow from the savings bucket to the car bucket. This will result in more money available from you car, but with overspent money in savings. Then transfer the same amount from savings to your main account you will use to pay the expenses for the car, assigning the transfer to the savings bucket. This will bring it back to 0.

Figuring out how much money is currently saved in the weak aspect of this method. If the savings account is only used for saved money, then looking at its balance will tell you. However, if you have several savings account or keep money in them that is not saved, then it's trickier. I have found the following works (I'm using MoneyWell 1.3.1):

• select all your accounts (to make sure you capture every transaction involving savings);
• select the savings bucket;
• then select every transaction.

The status bar in the bottom of the window will tell you how much you "spent" on savings, thus how much you saved. However it will only track transactions that are in MoneyWell, so I don't know right now how to include the money saved away when one starts using MoneyWell.

Note that the graph displayed shows how much you saved each month and does not show the accumulation of saved money.

Pros Simple to use, recommended by the author of MoneyWell, works well with a single savings account holding only saved money.

Cons No gratifying graph showing money accumulating (to be honest, no approach has it...). When saved money is mixed with money assigned to other uses, it may be difficult to know how much was saved away. I don't know how to integrate the initial balance of savings accounts in this approach.

Savings as Money Flows

The second approach tries to follow very closely the inspiration of MoneyWell: the envelope system. The idea here is that saved money is sitting in a big fat envelope, hidden under the mattress, and each month we add a little more to the savings envelope, just as we put money in the rent envelope or in the groceries envelope.

With this approach, envelopes are of course buckets, and one accumulates savings in the savings bucket. The way it works is as follows.

As in the previous approach, one has a savings bucket and probably some allocation to it in the Spending Plan. When income arrives, it is allocated, and some of it ends up in the savings bucket. The main difference with before is that it now stays there. If we transfer the money to a savings account, we do so without assigning any bucket to the transfer: we don't care where this money is, we have completely decoupled savings from any account.

If we have some extra money in a bucket, be it the income bucket or the dining out bucket, which we don't want to spend, we can save it easily by doing a money flow. Independently, we can optimize where the money is, transferring extra money sitting in a checking account into a savings account that generates interests. This money may be saved, or it may be accumulated for a future planned transaction. The point here is that where the money is and what it will be used for are considered two different things.

When saved money needs to be spent, flow it from the savings bucket to the appropriate one. As before, you may do an actual (unassigned) transfer, but it may not be necessary.

To know how much money is saved, just look at the bucket. And to see the history of saving money, select the savings bucket and look at the money flows.

As concerns initial balances of saving accounts, one assigns them to an income bucket, and flows the amount corresponding to actual savings to the savings buckets. The rest may remain in the income bucket for future flows and allocations.

There is one big drawback to this approach, however, is that currently money flows are not included in the graphs (only transactions are). Thus there is no graphical view of how much was saved each month.

Pros One glance view of how much is saved. Complete decoupling of saved money from where it actually is. Easy to set up.

Cons No graphs.

Combining the approaches: Savings as Transactions

The final approach tries to address the absence of graphs. It is a hack in a sense, but it may be a solution to those who want to see some graphical display of what money was put away.

The main idea here is that only transactions are graphed, but that the previous approach only uses money flow. Thus one should create a transaction for each savings money flow.

To do so, the simplest I found was to create a new bucket called "To Save". One allocates income to this bucket, and when there is some money in it, she transfers it to another account, assigning the outgoing part of the transfer to the To Save bucket, and the incoming part to the savings buckets. This actually results in a transaction that increases what is available in savings. (A side effect of this approach is that it entices the user to move the saved money out of the checking account, where it's not generating interests.)

The main drawback of this approach is that one has to have a transfer for every money flow, even if no money is actually moved. As MoneyWell allows transfers within the same account, this can actually be done, polluting a little one's account with extra transactions.

Setting up the initial balances is very simple if everything in the account is actually savings: assign the initial balance to the savings account. Otherwise you may split the initial balance into as many buckets you need, assigning them directly. (Hint: using split transactions for this is actually very useful...)

Pros One glance view of how much is saved. Complete decoupling of saved money from where it actually is. Some graphs.

Cons More complex to set up. Extra bucket. Some extra transactions.

One should not that in both latter approaches, the savings bucket is a bit special in the sense it should never go in the negative.

To conclude, I should say I'm actually using the second approach for my savings, as it fits really well the envelope perspective, and the first approach for investments (my PEA, for French readers), as I do not track them inside MoneyWell.

What would make the second approach much nicer would be an addition to the graphs, displaying how much money is available in the selected bucket at the beginning of each month, for instance using a thin red line. Thus one could see the accumulation of available savings. An even better addition would be some special "accumulation" buckets, with different graphs than usual buckets, and some constraints that they cannot be overspent. Well, this should fill up my Christmas Wish List for future versions of MoneyWell