I love sinking funds! 

I love sinking funds! 

Saver by heart

I am a saver by heart, and I love sinking funds for expenses that I know that are coming. It’s one of the best ways to save money for those upcoming, planned expenses to prevent you from going into debt – or even jumping into your emergency fund. Remember, an emergency fund is for the unknown and a sinking fund is money set aside for things that you know that are coming. 

For example, the last time we went to the dentist, he told us that in the next 6 – 9 months we would all need some work on our teeth. So, we created a sinking fund for the dentist. (To be fair, I should have had one already because our health insurance doesn’t cover dental.) We now have almost $1000 in the dentist sinking fund and I am confident that we will be able to cover the fees with this cash. 

How do sinking funds work?

Sinking funds work like this: Every month, on or just after pay day, I place money aside into several savings accounts with our bank. In my dentist sinking fund, I have been placing $200 a month as I knew that the money would be needed in a short period of time. In our Christmas fund, I place at least $50, sometimes more, depending on what outgoings take priority each month, but I always make sure that we put at least $50 in there. 

Don’t take upcoming expenses out of one month’s budget!

Sinking funds are great for things that you don’t want to take out of one month’s budget. Here is a list of our sinking funds:

  • Holiday
  • Moving costs (We are planning a move in Summer 2023)
  • Car maintenance
  • Dentist
  • Christmas
  • Birthdays
  • Insurances (house contents, car, motorbike and so forth)

I must admit that I find it so therapeutic to place the money into the different accounts each month. My husband laughs when he sees them all lined up in our banking app – however, he doesn’t laugh when the garage sends us a bill for the car repairs, as he knows we have a sinking fund to cover it. It does give us breathing space. 

Be intentional

It all comes down to being intentional – I love that word! We know exactly what the money is for and we plan accordingly. I can highly recommend sinking funds and if you haven’t started yet, then today’s the day! Here are some questions to help you get your sinking funds started:

  1. What are you saving up for?
  2. How much will you need & how long have you got to save? Do some Math! 
  3. Remember to include your sinking fund in your budget. 

For a nerd like me, it’s super exciting to see your sinking funds grow every month. But most of all, it gives us peace to know that we have things covered and we don’t have to go into debt to pay for those upcoming expenses. 

If you have any top tips or thoughts on sinking funds, then please do leave a comment below!

6 thoughts on “I love sinking funds! 

  1. I love this idea! We haven’t referred to them as sinking funds but we keep this practice as well! The only one I would add is a “charity” sinking fund. We love ours! When friends ask us to donate to a race they’re running for cancer research, for example, or our church asks for a donation to help people in need, we have that pot of money ready. We intentionally decide how much we’d like to give away each year, divide it by 24, and move money in there after each pay period like you suggest! Great column, June!

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