If you’ve ever felt blindsided by a big expense, you’re not alone. That’s where sinking funds come to the rescue. By setting money aside for specific categories, you can handle planned expenses and even some unexpected ones without derailing your budget. In this post, I’ll walk you through the six sinking funds that keep me prepared for just about anything, and I’ll share other ideas to help you customize your own sinking funds.
What Are Sinking Funds?
Sinking funds are savings accounts earmarked for specific expenses. Instead of scrambling to find money when an expense comes up, you’ve already planned ahead. Think of sinking funds as a financial safety net for planned costs or predictable emergencies.
My 6 Essential Sinking Funds
Here are the sinking funds that make my family ready for anything:
- Car Account
This fund is a lifesaver! It covers maintenance like oil changes, tire replacements, and unexpected repairs. We also save for a future car replacement here, so we’re never caught off guard when it’s time to upgrade (which we don’t often do!). - Vacation
Traveling is not of significant importance to my family, but this sinking fund allows us to plan and pay for vacations without going into debt, should the mood strike us. From airfare to souvenirs, this fund covers it all. - Holidays/Seasonal
From Christmas gifts to Easter baskets, I use this fund to prepare for seasonal expenses. It takes the stress out of holiday shopping and ensures I can enjoy the season without financial worry. - Kids’ Activities
This fund includes everything from sports fees to back-to-school supplies. It’s a lifesaver for field trips, extracurricular activities, and even summer camp fees. Education is a priority for our family, and this fund ensures we’re putting money aside for future tuition, books, and other college-related costs. - Home Repair
Homeownership comes with surprises, like a leaky faucet or a broken appliance. This fund helps me tackle repairs and maintenance without dipping into my emergency fund. - Pet Savings
Covers vet bills, grooming, and pet supplies for our cat.
More Ideas for Sinking Funds
Depending on your stage of life or goals, here are additional categories you may want to consider:
- Wedding Fund: Save for your own wedding or contribute to a loved one’s special day.
- Baby Fund: Prepare for the costs of having a baby, from hospital bills to nursery essentials.
- House Down Payment: Planning to buy a home? This fund will help you gather your down payment and closing costs.
- Medical Expenses: Save for out-of-pocket healthcare costs, prescriptions, or dental work.
- Kids College: Education is a priority for our family, and this type of fund ensures you’re putting money aside for future tuition, books, and other college-related costs.
- Emergency Travel: Be ready for last-minute trips, whether for family emergencies or unexpected obligations.
- Big Purchases: Save for items like furniture, appliances, or electronics.
- Special Events: Fund birthday parties, anniversaries, or other celebrations.
- Debt Payoff: Use a sinking fund to set aside money specifically to pay down debt faster.
- Education or Skill Development: Save for courses, certifications, or workshops to advance your career.
- Self-Care and Wellness: Budget for gym memberships, massages, or therapy sessions.
- Retirement Contributions: If you’re working toward maxing out contributions, a fund can help you stay on track.
How to Start Your Sinking Funds
- Pick Your Categories: Decide which sinking funds are the most important for your family.
- Set a Goal: Determine how much you need to save and by when.
- Break It Down: Divide the total by the number of months left until your goal.
- Create a System: Use a separate bank account, cash envelope, or budgeting app to track each fund.
- Start Small: Even small contributions add up over time, so don’t feel pressured to save everything all at once.
Ready to Start Your Sinking Funds?
Sinking funds have been a game-changer for our finances, giving us peace of mind and helping us avoid debt. Which sinking funds will you start today? If you’re looking for more budgeting tips and tricks, check out my YouTube channel for the video that inspired this post!
