Sinking funds: the end of surprise expenses

A sinking fund is money saved monthly for a specific expense you know is coming: car insurance, holidays, a new phone, car repairs. When the bill arrives, the money is waiting.

Set them up

1. List expenses that don't come every month (last year's statements help)
2. Write down the amount and when each is due
3. Divide each amount by the months until it's due
4. Add the monthly amounts together and transfer that total each payday

Where to keep them

• Many online banks let you create several named savings "buckets"
• Or use one savings account and track each fund on paper or in a spreadsheet

Common sinking funds

• Car insurance and registration
• Car repairs and tires
• Holidays and birthdays
• Annual subscriptions and memberships
• Medical and dental costs
• Replacing a phone or laptop

General educational information, not financial advice. Rates and fees change; check with your bank or credit union. Nickel Savings isn't paid by any bank or financial company.