What exactly is a "sinking fund"?

iVillage Member
Registered: 07-24-2001
What exactly is a "sinking fund"?
Wed, 11-30-2011 - 5:49pm

It's different than an E/F, right?

Where to you guys keep these monies (in a separate checking account? in your main checking account?)

I've been keeping to a budget for the last 8 weeks (it hasn't been easy), but it seems like I keep taking money from one fund (ie:

iVillage Member
Registered: 04-10-2003
Wed, 11-30-2011 - 6:18pm
You got it! A sinking fund is a fund that holds money for things that are not unexpected, but are not regular. Car maintenance is a great example. We all know cars need maintenance (new tires, oil changes, repairs) but you can't necessarily predict when these things happen.
I have sinking funds for car maintenace, home maintenance, gifts (Christmas, bdays etc) the dogs (vet bills) copays, vacations, and clothing for me. I keep them in an ING direct account so that I can get them in a day or two if needed, but they are not accessable for me to easily get at.
When I started I was putting $20 a pay in sinking funds. At that point I just had them in one account and would use it for anything that came up. Now I put aside $200 a pay for these funds (and the efund). It's nice to see them grow because it means that when something comes up (like my $500 car repair) I'm not stuck!
Hope this helps!

Bex -

iVillage Member
Registered: 03-27-2005
Wed, 11-30-2011 - 6:22pm
I also have sinking funds for things like car registrations, taxes, car insurance etc... Like was mentioned before, it's money set aside for anything that you know is coming but is not a regular monthly bill. stacy
iVillage Member
Registered: 11-14-2008
Thu, 12-01-2011 - 11:55am

Thats right, its for things you spend money on but not all the time. Some people put the cash in different places, just make sure you can access it somewhat easily. It should be part of your budget. Guess how much it will cost, divide by 12 and reserve that money each month. Tweak your budget as things increase or change.

iVillage Member
Registered: 08-24-2007
Thu, 12-01-2011 - 7:41pm
I don't bank with ING, so what I've done is set up a seperate savings account for all the sinking funds and I keep a spreadsheet with what I've saved for each category.

I'm now at the point of taking $400 per pay for sinking funds. I tracked every cent I've spent for the last 3 years, so I really know what expenses crop up. I have many small sinking funds for those non-regular expenses like makeup, eyeglasses, Christmas, specific people's birthdays, etc. What's great about it is that I'm never caught short, and many of my sinking funds don't cost a lot of money from each paycheque (for example, I only take $4 per pay for makeup).

It's seriously lowered my stress levels.


empty purse

iVillage Member
Registered: 10-17-2008
Sun, 12-04-2011 - 7:32am
Does everyone earmark the funds for specific purchases? Or does anyone just dump them all in 1 spot and not keep track, mentally or otherwise, what the various accounts are for?

We keep ours in 1 spot, but I keep a spreadsheet to track how much is earmarked for each purpose. I often find myself running out of money in 1 category (poor budgeting) and stealing from others.

Thoughts? Every late Dec I do a sinking fund tune up based on the past year's expenses, so maybe this is just the end of the year pain before reallocating and facing what I've spent.
iVillage Member
Registered: 12-31-2010
Mon, 12-05-2011 - 1:57pm
I do one "emergency fund" and don't really track things in sinking funds. I do put money in an account for the kids' college bills directly from my pay, so it is there when I need it for tuition bills.
I also budget the big items like property taxes, car insurance, registration, in my six month projected monthly budget. We get 4 months with extra pays a year (2 for DH and 2 for me) so I earmark these big bills into those months.
iVillage Member
Registered: 08-24-2007
Tue, 12-06-2011 - 6:41pm
Hi Melissa,
I do it the same way you do -- it's all in one pot and I keep a spreadsheet. I also base the fund on the last year's numbers.

And yes, even with my careful planning, there are times I have to borrow from one fund to help another. An example was that last year, we had to use our Christmas sinking fund to pay for an unexpected vet bill for Gulliver, our cat. His sinking fund didn't have enough. But that isn't the only time. The process isn't perfect!

"... maybe this is just the end of the yar pain before reallocint and facing what I've spent." LOL, girl, I hear ya!!


empty purse