Glossary term
Sinking Fund
A sinking fund is money you set aside in regular amounts for a specific, expected expense, such as car insurance, holiday gifts or a future car repair. Unlike an emergency fund, which covers surprises, a sinking fund covers costs you can see coming. Spreading them out avoids a budget shock and keeps them off a credit card.
Updated October 17, 2026 · Editorial Team
How Sinking Fund works in practice
Pick the expense, estimate the amount, and count the months until it is due. Divide the cost by the months to get your monthly contribution. Many people keep several sinking funds, each in a separate savings bucket or tracked in a budget.
Say a $1,800 annual car insurance premium is due in 10 months. Saving $1,800 ÷ 10 = $180 a month covers it in full. If the bill is due in only 6 months, you would need $300 a month instead.
Sinking funds turn lumpy expenses into steady, predictable ones. That protects your emergency fund for true surprises and avoids interest charges from carrying large bills on a card.
Sinking Fund: quick questions
What is the difference between a sinking fund and an emergency fund?
A sinking fund covers planned costs with a known date. An emergency fund covers surprises you cannot schedule.
Where should I keep sinking funds?
Many people use a separate savings account or labeled sub-accounts so each fund stays visible.
How many sinking funds should I have?
As many as you have predictable, irregular expenses. Start with the largest one or two.
Sources
- Survey of Household Economics and Decisionmaking (SHED) — Federal Reserve Board. Accessed October 17, 2026.
- Consumer Resource Center — Federal Deposit Insurance Corporation. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations. See our methodology.
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