What Is a Sinking Fund? | All About Sinking Funds

In this video, I present everything you need to know about sinking funds. Including answering – what is a sinking fund, what are the benefits, what are sinking funds used for, how does a sinking fund work and how do I create one?

Whether you’re planning a trip to The Bahamas or buying a new appliance or even a new car—sinking funds help you pay cash for all of it and avoid the post-purchase regret. It’s a great way to be intentional about planning ahead and saving money for large purchases so you don’t have to add stress to your life by financing purchases.

What is a sinking fund?
A sinking fund is a strategic way to save money by setting aside a little bit of money each month.

- Save for anything and everything.
- Plan for adventure and memories.
- Ditch the guilt (and stress) that comes from financing large purchases.
- Plan ahead for those investable expenses.

A sinking fund takes the sting out of large purchases.

How does a sinking fund work?
Here’s how sinking funds work. You set up a savings account and set aside money every month for the purpose of purchasing the item at a set date.

What are sinking funds used for?
- New tires for your car
- Christmas gifts
- Vet bills
- Wedding expenses
- Plane tickets
- Birthday parties
- School books and supplies
- Clothes for a special occasion
- Vacations
- Home remodels
- Concert tickets

How to create a sinking fund?
1. Decide what you’re saving for
2. Decide how much you’ll need to save
3. Decide how and where you’ll save money
4. Set up your sinking funds in your budget and track monthly

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How do sinking funds fit into your financial plan? Drop your comments and thoughts here!