Sinking funds: the easy way to pay for big expenses
Most budget-busting bills aren't emergencies. They're predictable expenses that show up once or twice a year.
A sinking fund is money you set aside a little at a time for an expense you know is coming. Instead of scrambling when the car insurance bill arrives, you've already saved for it month by month.
Sinking fund vs. emergency fund
An emergency fund is for surprises you can't predict. A sinking fund is for costs you can predict, even if they're irregular: holidays, birthdays, car registration, annual subscriptions, back-to-school shopping, vacations.
The simple formula
Cost ÷ months until you need it = monthly amount.
- Holidays in 10 months, budget $600: $600 ÷ 10 = $60 a month
- Car insurance of $900 due in 6 months: $900 ÷ 6 = $150 a month
- New laptop in 12 months, $1,200: $1,200 ÷ 12 = $100 a month
Our free savings goal calculator does this math for any goal and date.
Common sinking fund categories
- Car: insurance, registration, maintenance, tires
- Home: repairs, furniture, appliance replacement
- Gifts and holidays
- Medical: deductibles, dental, glasses
- Annual subscriptions and memberships
- Travel
- Pets: vet visits and supplies (the free pet cost calculator from The Paw Plan estimates yours)
How to set them up
- List every irregular expense from the past year (your bank statements will remind you).
- Estimate the cost and the month it's due.
- Divide to get a monthly amount and add it to your budget like any other bill.
- Keep the money in a separate savings account. Some banks let you create labeled "buckets" inside one account.
Start with the one that hurts most
If a dozen sinking funds feels like a lot, pick the one expense that caught you off guard most last year and start there. Adding one fund at a time is how the habit sticks.
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Try the Planner freeQuestions people ask
What is a sinking fund in simple terms?
Money you save a little at a time for a specific expense you know is coming, so you can pay it in full when it arrives.
How many sinking funds should I have?
Start with one or two for your biggest irregular expenses, then add more as it becomes a habit.
Where should I keep sinking funds?
In a savings account separate from everyday spending. Many banks let you split one account into labeled buckets.
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Steady Sums shares general education, not financial advice. For decisions about your situation, talk to a licensed professional.
More money guides
How to start a Christmas savings fund (and how much to save each week)
$600 for the holidays feels big in December. Spread from January to mid-November, it's about $13 a week. Here's how to set up a gift fund that makes next December easy.
Read the guide →How to budget for Christmas (without a January hangover)
The holidays don't have to end with a card bill you're still paying in March. Pick one number, split it on paper, and let the list do the deciding.
Read the guide →How much should be in your emergency fund?
A clear way to pick your number, and a realistic way to get there without feeling overwhelmed.
Read the guide →Make it easier with the right tool
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