general
Sinking Fund
A sinking fund is money set aside regularly for a specific, planned future expense — car repairs, a holiday, a new appliance. It prevents large irregular expenses from derailing a budget.
A sinking fund is a predictable-expense buffer: you save $100/month in a labelled savings account so that when the $1,200 car registration comes due, you already have the money.
Common sinking fund categories: car maintenance, home repairs, annual insurance, holiday gifts, travel, medical expenses. Unlike an emergency fund (for unexpected events), sinking funds are for anticipated but irregular expenses.
Related terms
- Emergency Fund
- An emergency fund is a savings buffer covering 3–6 months of essential living expenses, held in liquid, low-risk accounts. It protects against job loss, medical emergencies, and unexpected large expenses.
- Budget
- A budget is a plan that allocates expected income to expenses, savings, and investments over a set period. It is the foundational tool of personal finance — you cannot consistently save or invest without knowing where your money goes.
- Cash Flow
- Cash flow is the net movement of money in and out over a period. Positive cash flow (income exceeds expenses) is the foundation of wealth building. Negative cash flow means you're spending more than you earn.
Frequently asked questions
What is Sinking Fund?
A sinking fund is money set aside regularly for a specific, planned future expense — car repairs, a holiday, a new appliance. It prevents large irregular expenses from derailing a budget.