Sinking funds: the fix for “surprise” expenses
Car registration, holidays, annual premiums. They are not surprises if you save a little for them every month.
Illustration
Many expenses that wreck a budget are not emergencies at all. Holiday gifts, back-to-school shopping, car registration and annual insurance premiums happen every year. A sinking fund spreads their cost across the months before they arrive.
How it works
Take the yearly cost, divide by 12, and save that amount each month. A $1,200 holiday budget becomes $100 a month starting in January.
Common sinking funds
- Holidays and birthdays
- Car maintenance, tires and registration
- Annual or semiannual insurance premiums
- Medical deductibles and copays
- Home or rental repairs
- Travel
Some banks let you create several named savings “buckets” inside one account, which makes sinking funds easy to track.
Plan a sinking fund
Use the savings calculator to see how long a monthly deposit takes to reach your target.
Plan a sinking fund →General educational information, not personal financial advice.