Have you heard of a sinking fund in budgeting? It’s a savings strategy with specific goals and deadlines to keep you on track. Sinking funds allow you to save small amounts over time for major purchases, annual gifts, and other upcoming expenses. Let’s explore how they work!
KEY TAKEAWAYS
How Sinking Funds Work:
Sinking funds let you set aside small amounts of money over time for future expenses. Instead of saving in a safe, use a high-yield savings or money market account to earn interest and enjoy federal insurance. Make regular deposits (weekly, biweekly, or monthly) until you reach your goal. Start with your top three priorities to avoid feeling overwhelmed, then tackle additional funds as needed.
Is a Sinking Fund Right for You?
There’s no one-size-fits-all financial solution, but sinking funds can benefit anyone, including high earners. They help prepare for large expenses and are a smart way to manage future costs.
