JagInsights › Glossary › Sinking fund
What is a sinking fund?
A sinking fund is savings for a bill you can already see on the calendar. How it differs from an emergency fund.
A sinking fund is money you set aside, a little each payday, for a cost you already know is coming: car insurance, a flight, a laptop, holiday gifts.
Worked example
Car insurance is $1,200 once a year. Saving $100 a month in a labeled savings pocket means the bill is already sitting there in month twelve. Paying it from checking the week it arrives is what makes people call a planned bill an emergency.
Why it matters
Emergency funds get raided for expenses that were never emergencies. A sinking fund keeps those raids from happening.
Questions people ask
Is this the same as an emergency fund?
No. An emergency is unexpected, necessary, and urgent. A sinking fund is for dates you can see.
Where should I keep it?
In savings, labeled, not in checking. The point is that it is harder to spend on dinner.
Do I need a separate account for each goal?
Labels inside one savings account are enough for most people. Extra accounts only help if the labels are not enough to stop you.
Educational information only. JagInsights is not a financial adviser, broker, or lender. See the Terms and Privacy Policy.