10 Sinking Funds You Should Start Today

From fun money to emergency savings, vacation to car insurance, there are so many different items to save for each month. I love using sinking funds each month to save for large expenses. It makes saving so easy and (I’ll admit) kind of fun. A sinking fund is simply saving a small amount of money each month over a length of time before you make a purchase. In doing so, you’re able to prepare easily for large purchases that you know you be encountering in the future.

Christmas is a great example of this: You know that it’s coming around every December so it’s expected that you will be spending money on gifts, decorations and Christmas activities. If you plan to spend $600 on Christmas 2017, the best way to cover these costs is by using a sinking fund. By breaking up $600 by 12 months of the year, you’ll find that you only need to save $50 a month! $50 a month feels a lot more doable than $600 all at once!

There are many other expenses you can cover by using a sinking fund. As a rule of thumb, if you know that a large expense will occur and you know how about how much it will cost, create a sinking fund for it! Saving for them is easy: take the total amount and divide it by how many months you have until the expense is due. Then save that amount each month! Here are some expense items that you could use a sinking fund for:

  1. Fun money fund: While we are paying off debts, our fun money is limited. But each month I get $50 and Jacob gets $50 of fun money. We can choose to save or spend it each month.
  2. Vacation fund: If you know you have a trip coming up, or you just want to save each month until you have enough to go somewhere, a sinking fund is the best way to go.
  3. Unexpected giving fund: This is probably our favorite fund. Each month we put $50 into an unexpected giving fund so that we can say yes easily to extra giving when something comes up.
  4. New car fund: Looking to purchase a car soon? Divide up the cost by the number of months until you need a new car and you’ll have the car paid for in time for the purchase!
  5. Emergency fund: It’s always important to be covered in the case of an emergency! This is essential to be saving for each month until that full emergency fund amount is reached.
  6. Christmas fund: As I talked about earlier, this is an expected expense each year. Don’t let December sneak up on you!
  7. Car maintenance fund: Cars cost money each month whether it’s new tires, oil changes, car registration, new brakes, etc… Saving money for car maintenance each month will help you be prepared for expected and even unexpected car maintenance.
  8. House maintenance fund: Similar to car maintenance, you will have expected and unexpected house maintenance expenses come up. Be prepared and save a little bit for it each month!
  9. Car Insurance fund: Some people pay for their car insurance every 6 months. Divide up the total 6 month cost by 6 and save that amount each month so that it won’t be so overwhelming every 6 months.
  10. Gift fund: Birthdays, anniversaries, Valentines day, Mother’s Day and Father’s Day happen every year. So do weddings and baby showers. Start a fund to save for gifts so that you can bless those you love with sweet gifts for their special days!
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