What Should You Know About Sinking Funds?

Sinking funds can be a gamechanger for individuals and households. It is a valuable tool to add to your financial toolbox for savings. 

This strategy helps those who want to manage their finances better and gain peace of mind.

What Is A Sinking Fund?

Sinking funds have long been helpful for companies and bondholders to minimize risk.

Once you determine what you want, say a new couch for $1,000-$1,500 for your living room, your sinking fund is for the sofa, not for another expense.

A Sinking Fund For Your Household

Sinking Fund Vs. Emergency Fund

Both your sinking fund and emergency fund are safety nets but for different purposes. 

How To Set Up Your Sinking Fund

1. Review Your Budget

Budgeting is an essential tool for understanding your income sources less fixed and discretionary expense categories. 

2. List Your Planned Purchases

Please make a list of sinking fund categories, break them down into more specific items. Then determine the target amounts for each.

3. Where Your Savings Will Go For Purchases

You can open an FDIC-insured saving account for each type or have one large sinking fund named sub-accounts.