Sinking funds: a list of 25 categories and how much to put in each

Sinking funds categories for the car and the home

Start with the bills that come once or twice a year. Last year's bank statements show what each one cost.

• Car insurance paid once a year: $1,200 due in 12 months is $100 a month.
• Car repairs and upkeep: $75 a month builds $900 a year for oil changes, brakes and the strange noise.
• New tires in 2 years: $34 a month for 24 months makes $816.
• Home repairs: $100 a month makes $1,200 a year for the leak, the broken heater or the paint job.
• A tax bill that comes once a year: $2,400 is $200 a month for 12 months.

Sinking funds for holidays, gifts and birthdays

These costs are on the calendar, so they are the easiest to plan. If you would rather save toward one fun total with a rising amount, the 52 week challenge and other savings challenges work as a game.

• Holiday gifts: $600 by December is $50 a month from January.
• Starting holiday gifts late? From July, $600 is $100 a month for 6 months.
• Birthdays for family and friends: $30 a month makes $360, enough for 12 gifts of $30.
• Weddings and parties you are invited to this year: 3 at $150 each is $450, or $37.50 a month.
• Back to school in August: $300 saved from January is $37.50 a month for 8 months.

Sinking funds for health, pets and kids

These costs come every year, just not on a set day. A monthly amount turns a surprise bill into a planned one.

• Dentist and eye visits your plan does not pay for: $50 a month makes $600 a year.
• Pet care: $40 a month makes $480 for the vet visit, shots and food bought in bulk.
• Kids' sports and lessons: $60 a month makes $720 for fees, gear and uniforms.
• Clothes and shoes: $40 a month makes $480 a year, so the new winter coat is already paid for.
• Glasses or contacts every 2 years: $300 is $12.50 a month for 24 months.

Sinking funds for big things you want

A sinking fund also works for things you choose, not just bills. For one big fixed amount, the plan to save $10,000 in a year splits it by payday.

• A trip next summer: $1,800 in 12 months is $150 a month.
• A new phone in 2 years: $900 is $37.50 a month for 24 months.
• A new couch in 18 months: $67 a month makes $1,206.
• The next car, paid in cash: $6,000 in 4 years is $125 a month for 48 months.
• A new laptop in 1 year: about $84 a month makes $1,008.

Small sinking funds to start with

If saving is new to you, start with one or two small funds and add more once they work. For bigger plans, see these financial goals examples.

• Yearly subscriptions and memberships: $20 a month makes $240 when they renew.
• A license or registration you renew each year: $10 a month makes $120.
• A holiday meal you host: $25 a month makes $300 for food and drinks.
• End of school year gifts for teachers and coaches: $10 a month makes $120.
• A fund for the bill you forgot: $25 a month makes $300 for the cost nobody planned.

What is a sinking fund, and how is it different from an emergency fund?

A sinking fund is money you save for a cost you know is coming. You know what it is for, about what it costs and when it is due. The name comes from finance, where a company puts money aside over time to pay back a loan.

An emergency fund is for costs you cannot see coming, like losing a job. A sinking fund is for costs you can: the car insurance bill comes every year. Keeping the two apart means a planned bill never eats the money meant for a real surprise.

Sinking funds vs savings: savings is money for later with no set date. A sinking fund has a name, a total and a due date.

How many sinking funds should you have, and how much to put in each

There is no right number. Start with 3 to 5: the biggest bills that caught you off guard last year. Go through 12 months of bank statements and circle every cost that did not come each month.

For each one, divide the cost by the months until it is due. $1,200 due in 12 months is $100 a month. Due in 6 months, it is $200. Add the monthly amounts together: that is what your sinking funds cost each month. To see a total as a chart of deposits, the savings challenge calculator works out each one.

If the total is more than you can save, drop a fund or push its date back. Filling 3 funds is better than starting 10 and stopping. This is general information, not financial advice.

Where to keep sinking funds

Keep them apart from the money you spend: a separate savings account, one account with a note for each fund, or cash in labeled envelopes. Pick the one you can keep up with.

Move the money on payday, before you spend. When a bill comes, pay it from its fund. That is the fund doing its job, not a failure.

If a fund runs short, a month of a no spend challenge can help fill it back up.

How to track sinking funds

Write down every deposit the day you make it, and keep a running total for each fund. A review of 138 studies found that people who monitored their progress reached their goals more often, and the effect was larger when the progress was written down.

In Chaltra, make one challenge for your sinking funds. Set the target to the year's total and add each fund as its own color, up to five. Every deposit fills the picture a little more, in that fund's color. A challenge of up to 30 days is free. A full year needs Premium.

Frequently asked questions

What is a sinking fund in simple words?

Money you put aside a little each month for a cost you know is coming, like a yearly insurance bill or holiday gifts. When the bill comes, the money is already there.

How many sinking funds should I have?

There is no set number. Most people start with 3 to 5 funds for their biggest yearly bills, then add more once those work.

How much should I put in a sinking fund?

Divide the cost by the months until it is due. $600 due in 12 months is $50 a month. Due in 6 months, it is $100 a month.

What is the difference between a sinking fund and an emergency fund?

A sinking fund is for a cost you can plan, like car repairs or gifts. An emergency fund is for a surprise, like losing a job. Keep them apart.

What are the most common sinking funds?

Car insurance and repairs, holidays and gifts, home repairs, medical and dental costs, pets, travel and yearly subscriptions.