🏦 Sinking Fund Calculator
Calculate equal periodic deposits needed to reach a future savings target.
What Is a Sinking Fund?
A sinking fund is a dedicated savings account for a specific, planned future expense. Unlike an emergency fund (unexpected expenses), a sinking fund is for known upcoming costs: car purchase ($15,000 down payment in 2 years), annual insurance ($2,400 once a year), vacation ($3,000 in 8 months), or home renovation. Sinking funds prevent large expenses from disrupting your monthly budget.
Setting Up Multiple Sinking Funds
Personal finance experts often recommend maintaining 3–6 sinking funds simultaneously: car maintenance/replacement, home repairs, medical/dental, vacation, and large irregular purchases. Many high-yield savings accounts allow sub-accounts or "buckets" — label each with its goal and automate monthly transfers. This "set and forget" approach removes budget stress when large bills arrive.
People Also Ask
High-yield savings accounts (HYSA) paying 4–5% APY are ideal. The money should be liquid (accessible within 1–2 days), safe (FDIC insured), and earning at least some interest. Don't invest sinking fund money in stocks — you can't risk a 30% market drop the month before you need the funds.
Yes. Emergency fund = unexpected, unplanned expenses (job loss, medical emergency). Sinking fund = planned future expenses you know are coming. Both are essential. Many people avoid financial stress by having both: 3–6 months emergency fund plus several targeted sinking funds.