Sinking fund
Why sinking funds exist
Some expenses are predictable but irregular: annual insurance premiums, holiday travel, gifts, vehicle maintenance, software renewals. Without a plan, each one feels like a surprise — and you end up dipping into your emergency fund or going into debt. Sinking funds spread the cost across the months in between.
How to set one up
Pick a known upcoming expense and a target date. Divide the cost by the number of months between now and then. Transfer that amount into a savings account or earmarked category every month. When the expense arrives, the money is already there.
Common sinking-fund categories
Annual insurance premiums, vehicle servicing, holiday travel, Christmas gifts, school fees, property taxes, subscriptions renewing annually, planned home maintenance, and replacement funds for laptops or phones.
In FinWise
FinWise budgets support sinking funds out of the box — create a category with a target and roll the balance forward month-to-month. When you spend it, the budget zeroes out and starts accumulating again for next year.
Related terms
Manage Your Money Better Today
Stay on top of your finances and save money with FinWise
Last reviewed
