SavingNovice 4 min read
Sinking funds: how to stop being surprised by known costs
Car registration, holidays, insurance premiums — predictable costs deserve their own plan.
A sinking fund is money you set aside monthly for a cost you know is coming but that doesn't happen monthly.
How to build one
- Write down the expense and the total amount — for example, $1,200 for holiday gifts.
- Divide by the number of months until you need it — $100 a month for 12 months.
- Treat that number like a bill in your budget.
- Common sinking funds: car maintenance, annual insurance, travel, gifts, property tax, pet care, home repairs.
- You can keep them all in one savings account as long as you track the target amounts separately.
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