Sinking Funds Are They Worth It???

A Sinking Fund is a financial account set up to save money over time for a planned expense. Every year we have to buy holiday gifts, pay renters/homeowners insurance, birthday’s, just to name a few.

Instead of a big hit to your budget, you put aside a smaller amount over time. It’s not a savings account but you will be saving your money for a specific goal with a deadline.

Maybe your washing machine and dryer are on their last loads. Start saving now. If it dies after you saved all the money, you won’t have to dip into your emergency fund or take on debt to pay for it.

Some banks have savings buckets where you can split the money. It’s all in one account but it’s in different buckets. One of the things that annoys me are those experts who claim they have 25 different bank accounts. They don’t, what they have is a bank account that allows buckets withing the one account. Yet another lie they tell us.

Determine how much you need. If your car insurance is $1200 a year, $100 a month goes into the sinking fund bank account.

Don’t overcomplicate it and have sinking funds for everything. It starts to become confusing. Stick to a few bigger ticket expenses. This is a simple strategic way to stay on budget.