22 Sinking Fund Categories That Will Make Your Life Easier — Daynel Brown Financial Coaching (2024)

A sinking fund is where you set aside smaller amounts of money each month in order to easily cover a large expense later.

When you create a sinking fund, you do so with a very specific purchase or expense in mind, which makes it different from just having a general savings account.

You’re not just limited to one sinking fund, either. You can have as many as you’d like, depending on how many future large expenses you anticipate having.

And I want to emphasize the word “anticipate” because a sinking fund is also very different from an emergency fund. Your emergency fund is for those unexpected and urgent expenses in life. Your sinking fund, on the other hand, is for the things you know are coming and are working your way up to (money-wise).

Sinking funds are great because you build them into your budget as another line item. Then, you decide how much you’re going to budget towards each sinking fund. In that way, contributing to your sinking funds each month becomes almost automatic.

And because you’re breaking a large expense down into smaller, more doable savings amounts each month, you barely feel the impact on your wallet.

Yeah, that vacation you plan to take next year may cost $1,500. But if you put aside just $125 per month this year, you’ll have exactly what you need, without much thought, effort, or strain on your bank account!

Whether it’s the latest iPhone, a top-of-the-line stroller, or new furniture, we’ve all got purchases that we would consider to be big ticket items.

If you haven’t properly prepared to make a big purchase, you could end up feeling guilty about using up such a huge chunk of your budget (or, even worse, taking on unnecessary debt) to get what you want.

That’s where sinking funds come in. If you put aside a little each month, you’ll have what you need when you need it. You can feel good about your spending because you’re using money that was always earmarked for that exact purpose! You don’t have to struggle with feeling irresponsible because this spending was always a part of the plan. 😉

Not all bills occur monthly. Sinking funds help you prepare for the ones that only happen semi-annually or annually.

I remember some years back when my husband and I got the bill for our property and car taxes. We were diligent about budgeting, but these major expenses weren’t even on our radar. So, we didn’t account for them, and I was so annoyed. 🤦🏽‍♀️We had to do a LOT of moving money around in our budget to make sure we were able to pay those taxes on time!

We learned our lesson the hard way. But now, we have sinking funds for our taxes. We put a little aside each month, so that when the tax bill comes around, we’re fully prepared to pay. No panic or money rearranging necessary! 😅

The reality is that not everything is affordable on the spot. BUT sinking funds help you to afford even the things you never thought you could!

I have to go back to talking about vacations on this one. My husband and I LOVE traveling around the world. We’ve been able to afford some pretty amazing vacations – some of which cost a pretty penny – not because we had unlimited amounts of money, but because we had a sinking fund.

We’re able to enjoy some of the finer things in life – without going into debt – because of sinking funds. I’m telling you, sinking funds really are good for the soul. 😊

If you’re in a season of life where someone you know is getting married every time you turn around, create a sinking fund just for weddings! That way, you’re always prepared to bless the happy couple with a gift when the time comes.

A wedding sinking fund can also come in handy if you know you’re going to be in someone’s wedding. It can be very expensive to be in the wedding party!

You can even lean on your wedding sinking fund if someone you know decides to have a destination wedding. After all, you’ll have added costs like airfare and accommodations to account for. With a sinking fund, those expenses don’t have to break the bank!

Now that we’ve tackled back-to-school expenses, it’s time to consider all those extra-curricular activities, too. Even if you’re not quite sure which activities your child will be participating in, start an extracurriculars sinking fund anyway. That way, whether it’s sports, music lessons, martial arts, gymnastics, dance, or whatever else, you’re prepared.

Also, if your child is participating in any type of activity where they could potentially “go to nationals,” consider that as you contribute money to your sinking fund. It’ll be nice to have the money to travel to the competition without having to think twice about where the money will come from.

Sheesh! This is the 4th kid-related sinking fund in a row. Kids cost money!

If you plan on sending your kids to summer camp, put money aside for it all throughout the school year. Then, you don’t have to worry about the full cost of summer camp coming out of just your June, July or August budgets.

One of the things I can’t stand about cars is how much money we have to spend on maintenance. 🙄 I feel like our cars need oil changes every time I turn around. And if it’s not that, it’s car washes, new tires, windshield wiper replacements, tune-ups…you name it!

The only thing that makes me feel slightly better about it is having a car maintenance sinking fund. It’s psychological, but then when we have to spend money on the cars, I’m like, “Yeah well, this money was always meant for the cars anyway.” It makes it easier for me to shrug it off, pay the money, and keep it moving.

If you’re anything like me, you should go ahead and get that car maintenance sinking fund started. 😉

And even if you’re not like me, all cars need maintenance. Create that sinking fund to help cushion the blow of the costs.

Speaking of cars, will you need a new one at some point? No car lasts forever. And cars are expensive, whether they’re brand new or used. That’s why so many people finance their cars and have a car note.

A sinking fund for your next car can be very helpful. You may end up saving enough to buy your next car in cash. And if so, woohoo! 🎉You should feel so good about avoiding debt!

But even if you don’t have enough to pay in cash by the time you need a new car, you’ll at least have enough to put a significant amount of money down. If you can pay as much as possible upfront, that’s less money you have to cough up for years of interest and other fees.

If you own a home, there are lots of irregular expenses that pop up. It could be that your dishwasher gives out. Or maybe you need a new shower head. Maybe it’s time to have your carpets professionally cleaned again.

These are all examples based on things my husband and I have experienced over the past few years. And each time, we were able to take care of things by pulling from our house maintenance sinking fund!

Looking to replace your old countertops with new granite ones? Or maybe it’s time for a bathroom renovation. Hoping to have a walk-in closet added in your bedroom?

Whatever the renovation might be, if you know you’re looking to have it done, start a sinking fund for it!

If you have a goal to purchase a home – even if it’s not for years to come – create a sinking fund for it. Put money aside each month for as long as you can, so you can come to the table with as large of a down payment as possible!

Having a sizable down payment will help you avoid PMI (private mortgage insurance). It’ll also decrease the loan amount you need, which means you’ll owe less in interest!

Have you ever noticed how insurance companies often offer a discount if you pay your full premium upfront?

My husband and I save hundreds each year by doing this for our car insurance as well as our homeowners insurance. How do we do it? A sinking fund, of course!

If you’re currently paying your insurance monthly, create a sinking fund in addition to that. So each month, you’re paying your insurance bill and saving up to pay in full when you renew your insurance. After that point, you’ll be able to drop those monthly payments and only focus on the sinking fund. Enjoy the savings! 💰

To be clear, a medical emergency might result in an unexpected and pricey bill. You’d lean on your emergency fund for that.

But a sinking fund for medical expenses would be great to lean on for things like copays from doctor visits, prescriptions, or the braces it turns out your little one needs.

Self care is important. But we often sacrifice spending on self care in favor of taking care of other needs.

With a self care sinking fund, you can put a little something aside each month and then spend guilt-free on whatever self care looks like for you…a weekend getaway, a spa treatment, a massage, getting your hair and nails done. Do you! 💁🏽‍♀️

Usually, property taxes are included in your mortgage. But if you own your home outright, then you receive a property tax bill annually or semi-annually.

Creating a property tax sinking fund can be super helpful! There’s nothing like being able to pay off a large property tax bill without batting an eye. In the month(s) when your property taxes are due, you get to keep calm and carry on with your normal budget like it’s nothing!

A sinking fund is simply when you set aside smaller amounts of money each month to cover a larger expense later.

Sinking funds help you painlessly save for big purchases, spend guilt-free, prepare for yearly expenses, and be able to afford just about anything in the long-run!

Decide which of these 22 sinking fund categories would be useful to you. Then, get saving and making your life easier!