Sinking Funds: How to Save for Costs You Know Are Coming

A sinking fund is money you set aside a little at a time for a cost you know is coming: Christmas, car repairs, the yearly car registration. When the bill arrives, the money is already there.

The formula

(Goal − already saved) ÷ paychecks left before the date = amount per paycheck

Example: $1,200 for Christmas by December 1, $300 saved, 4 biweekly paychecks left: (1,200 − 300) ÷ 4 = $225 per paycheck.

Sinking fund ideas

• Christmas and gifts
• Birthdays
• Car repairs and maintenance
• Car registration and insurance paid yearly
• Annual subscriptions
• Vet visits
• Home repairs
• Back to school
• Summer trip
• Doctor and dentist copays

Where to keep it

A separate savings account keeps the money out of everyday spending. One account is enough; track each fund's balance in a spreadsheet.

Want this worked out for you? The free Sinking Funds Tracker (Google Sheets and Excel) calculates the amount per month and per paycheck for up to 20 funds.

Quick answers

What is a sinking fund?

Money you save a little at a time for a known future cost, such as Christmas, car repairs or a yearly bill, so it's covered when it arrives.

How do I calculate a sinking fund?

Subtract what you've already saved from the goal, then divide by the number of paychecks left before the date.