A sinking fund is a simple but powerful strategy: set aside small amounts regularly to prepare for large, predictable expenses. This calculator tells you exactly how much to save each month to have the money ready when you need it.
How This Calculator Works
This calculator creates your sinking fund plan:
- Goal Amount: The expense you're saving for
- Target Date: When you need the money
- Current Savings: What you've already saved (if any)
- Monthly Contribution: Amount to set aside each month
- Progress Tracker: Percentage toward your goal
The Formula Explained
Remaining Amount = Goal - Current Savings
Monthly Contribution = Remaining Amount / Months Until Goal
Example: Save $1,200 for holiday gifts in 10 months: Monthly = $1,200 / 10 = $120/month
With interest factored in, you'll need slightly less per month.
Step-by-Step Example
Planning Annual Expenses
| Sinking Fund | Goal | Months | Monthly Savings |
| Car Insurance | $900 | 6 | $150 |
| Holiday Gifts | $600 | 12 | $50 |
| Vacation | $3,000 | 18 | $167 |
| Car Repairs | $1,000 | 12 | $83 |
| Total Monthly | | | $450 |
No more budget-busting surprises—you're ready for each expense!
Frequently Asked Questions
What is a sinking fund?
A sinking fund is money you set aside regularly for a planned future expense. Unlike an emergency fund (for unexpected costs), sinking funds are for known expenses—car insurance, holidays, vacations, home repairs. When the expense arrives, the money is waiting.
How is a sinking fund different from an emergency fund?
Emergency fund: Unexpected expenses (job loss, medical, repairs). Keep liquid and accessible. Sinking fund: Planned expenses on a known timeline. Separate accounts for each goal. Emergency funds are for surprises; sinking funds prevent known expenses from feeling like emergencies.
What expenses should have sinking funds?
Perfect for sinking funds: (1) Annual bills (car insurance, property tax, subscriptions), (2) Irregular expenses (car repairs, home maintenance), (3) Planned purchases (vacations, electronics, furniture), (4) Holiday spending, (5) Back-to-school costs. Anything big and predictable benefits from a sinking fund.
How many sinking funds should I have?
Start with 3-5 essential categories, then add as needed. Common starters: car expenses, home maintenance, holidays, gifts, vacation. Too many becomes overwhelming to manage. You can group related items (all car costs in one fund). Use separate savings accounts or account "buckets" to track.
Where should I keep sinking fund money?
High-yield savings accounts work well—liquid, interest-earning, FDIC insured. Many online banks offer "buckets" or "vaults" to label money by purpose within one account. Keep sinking funds separate from everyday spending to prevent accidental use.
What if I don't save enough in time?
If your fund falls short when the expense arrives: (1) Cover the gap from your emergency fund (then replenish), (2) Adjust spending elsewhere temporarily, (3) Look for ways to reduce the expense, (4) Adjust future sinking fund amounts upward. Don't skip the expense or put it on credit cards.
Should sinking funds earn interest?
Yes, keeping sinking funds in a high-yield savings account adds extra money. At 4% APY, a $5,000 sinking fund earns ~$200/year. For short-term funds (a few months), interest is minor. For longer-term savings (2+ years), you might consider CDs or I-bonds for better returns.
How do I start a sinking fund system?
Steps: (1) List all predictable non-monthly expenses for the year, (2) Calculate monthly savings needed for each, (3) Open a savings account (or use buckets), (4) Set up automatic transfers on payday, (5) Transfer from fund to checking when expense is due. Automate everything possible.
Key Points to Remember
- List all annual expenses: Insurance, holidays, maintenance, memberships
- Automate transfers: Save on payday before you can spend it
- Separate from checking: Out of sight, out of mind
- Adjust as needed: Update amounts when estimates change
- Use high-yield accounts: Earn interest while saving