Cash balances in investments

Question

I have various investment accounts. When setting up some of those, I selected the option "Show cash in a checking account." When setting up others, I didn't. The thing is, it's been years, and I no longer remember why I made particular choices. Are there any guidelines on when to pick one over the other?

Tom Young · Accepted Answer

Probably the best guideline here is to follow what's happening out there in the real world.  If the Financial Institution works in that fashion - securities in one account, cash kept in a different account, then that's clearly the way to establish those Accounts in Quicken.

I suppose an exception to this rule might make sense if you're using the one real world investment account as a checking account too, with lots of "non-investing" activity flowing through that one account.  That would be a judgement call on the user's end.

Chris_QPW · Accepted Answer

The main reason for "Show cash in a checking account" is if your financial institution allows you to treat an investment account as if it was a checking account and do things like write checks against it.

Quicken Windows investment account registers are not really geared for this.  So, what they did is allow for this setting which basically creates a virtual checking account.  When a "cash" transaction is downloaded into the investment account it is pushed into the virtual checking account, and when cash is needed for a buy or such it is transferred out of the virtual checking account to the investment account.  This allows someone to use "checking transactions" in that virtual checking account.

Others might have a different opinion and use this setting for all their investment accounts, but mine would be only if it is required for the above needs.  Also, sometimes people make it sound like you can switch back and forth between these modes with no problem at all.  Well, my take on that is "if you are lucky".  Depending on what transactions have been recorded changing back to not having that setting set can definitely mess things up.  Switch to it is generally OK though.

Rocket J Squirrel · Accepted Answer

A linked checking account is classified by default as a Spending account. It appears in the Spending section of the Account Bar and will be included in reports that are spending types of reports. If that's the way you like Quicken to operate, then a linked account is right for you.

I personally prefer to see that cash in the Investing account itself. I can still write checks from that account without a linked checking account, and I can customize reports which normally wouldn't include the investing account to do so if needed.

Jim_Harman · Accepted Answer

Also if your broker always moves any cash to a "sweep" or settlement fund the way Vanguard does, the linked checking account may not be very useful. When you receive a dividend, it will appear in the linked account then immediately be used to purchase a money market fund, reducing the linked account's balance to zero.

With some brokerages, you have the option to see the cash either as cash or in a money market fund.