sinking fund categories

What Are Sinking Fund Categories and How to Use Them to Your Advantage

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Have you ever wondered how people just pay cash for big-ticket items? Most of us think this is just a luxury of rich people while we reach for our credit cards to pay for those plane tickets or the new couch we need.  

Those “rich” people can pay cash for these expenses, not because they are well off, but because they use sinking funds to plan and save ahead of time.  

Planning sinking fund categories can help you pay for upcoming expenses instead of fumbling for money last minute. 

So, today we’ll talk about the sinking funds and the categories you should be saving for.

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sinking fund categories

What is a sinking fund?

A sinking fund is a way to save for expenses that aren’t on your budget every month.  

It’s used to save for upcoming costs for things you want or anticipate you’ll need.

Setting sinking fund categories allows you to set aside a certain amount of money each month until you have the amount you need.

What is the purpose of a sinking fund?

Sinking funds are used for:  

  1. Something that doesn’t happen in your monthly budget but occurs on the same day (Christmas, yearly subscriptions, Birthdays, etc.)
  2. Something that doesn’t happen monthly, and you don’t know when it will happen, but you know the expense is coming (home repairs, new tires, etc.)

Sinking funds keep you from going into debt for something you could have saved and prepared for.  

Benefits of a sinking fund

Saving for your sinking funds has its benefits; here are a few.

Helps you manage your debt

Having sinking funds will help you manage your debt because

  1. You’re not caught off guard with expenses and using your credit card to cover them.
  2. You can pay off more debt because you’ve already saved for upcoming costs. 

No impulse spending

Saving helps you learn self-control. 

According to an article by Psychology Today, people who have mastered delayed gratification are more likely to succeed in all aspects of their life. Which leads to reaching their long-term goals.

Although it may be painful at the moment, saving and paying cash will be worth the reward long-term.

Save on interest rates

When you buy something with cash, you don’t have to worry about the interest accruing on your credit cards.

Even those 0% interest credit cards can turn into an enormous amount of interest if you make a late payment or don’t pay the item off in time.  

Types of sinking funds to have

Everyone is going to have different funds they want to save for. Here is a list of sinking fund examples to consider.


Whether you have insurance or not, most of us have some medical-related costs that we need to save for.  

Some sinking funds to save for may include:

  • copays
  • dental
  • braces 
  • eyecare, including glasses and contact lens
  • prescriptions you pay out of pocket
  • planned surgical expenses
  • vitamins and over the counter medications that you use monthly


Activities can be costly depending on how your lifestyle is. Whether your busy with kids or have an active social life, you need to save for it.

Some sinking funds to consider include:  

  • vacations
  • annual membership to places like the zoo, aquarium, waterpark, children’s museum
  • travel to visit family


Every time I turn around, there is a holiday, birthday, or anniversary that requires a gift to be bought. And don’t forget about Christmas!  

Setting up a sinking fund for these occasions will help you not be caught off guard when you have to spend the money.

Consider saving for:

  • birthdays
  • anniversary
  • Christmas
  • teacher gifts

Children are freaking expensive! 

So, having money saved will lessen the burden when it comes time to pay for the endless amount of crap they need and activities they participate in.

It may be a good idea to save for these expenses:

  • having a baby
  • daycare
  • summer camp
  • homeschool fees
  • babysitter fees
  • extracurricular activities
  • birthday parties
  • back to school shopping
  • fundraisers
  • college/further education


Holidays happen every year, and some of us like to go big for these particular events.

So, you may want to set up a saving account to save for:

  • decorations
  • costumes
  • dinners
  • parties
  • BBQ’s
  • fireworks

Pet expenses

If you have pets, you know they can be just as expensive as kids sometimes.  

So, make sure to set aside some extra money for these costs:

  • annual checkup and shots
  • prescription dog food
  • prescription medications
  • boarding
  • grooming
  • treats and toys

Car expenses

Cars need to be maintained for safety and to help them last long-term.  

Some sinking funds to consider when it comes to your car:

  • new tires
  • car maintenance
  • repair
  • inspection
  • registration
  • new car

Houses are an ongoing expense and probably the most expensive cost we pay. 

But, we have to maintain our homes, so it’s a good idea to set up these sinking funds: 

  • Down payment for a home
  • HOA fees
  • insurance
  • property tax
  • repairs (HVAC, roof, etc.)
  • moving expenses
  • furniture
  • home maintenance (septic cleanout, HVAC maintenance, etc.)
  • natural gas
  • landscaping
  • new appliances

Self Care

It’s important to take care of yourself. And if you’re a parent, you probably do without a lot of times because you feel guilty spending the money.

But, you should make a point to set up a sinking fund to invest in yourself.  

Here are a couple self-care savings to consider:

  • gym memberships
  • hair cuts
  • manicure/pedicure
  • clothing
  • therapy
  • grooming
  • beauty
  • hobbies
  • date night


Weddings are crazy expensive, and trust me, you don’t want to start your new marriage off with debt from that one special day.

Saving for these big-ticket wedding items would be a good idea:

  • entertainment
  • venue
  • flowers
  • food/drink
  • decorations


Set up a saving account for these business-related expenses you’ll most likely incur if you work for yourself.  

  • taxes
  • office supplies/furniture
  • subscriptions


If you’re a military family, you know nothing is ever set in stone, and things change in the blink of an eye. 

You want to make sure you have these sinking funds set up so you’re not caught off guard and taking on debt that could have been prevented. 

  • pcs fund
  • emergency travel fund
  • military clothing fund
  • retirement fund

Check out this Penny Saving Challenge from a fellow blogger. It’s an easy way to save $667 in a year saving your pennies!

How to set up a sinking fund?

Here are a couple tips to help you set up your sinking fund categories.

Define your categories

Last year’s spending will be a good indicator if you don’t know what things you should be saving for. 

Take a look at what you spent your money on. Were there any annual expenses that you didn’t account for, or are there upcoming things like appliances that need to be replaced?

Make a list of all the things you should be saving for throughout the year.

Decide on Amount

Figure out how much you need and how much you’re going to save each month.

You can look at your monthly spending, see what you spend on specific categories, and add them up for the year. This works for things like medical expenses, personal care, or child-related expenses.   

Or, you can research how much an expense is to see how much needs to be saved. This works for things like vacation or new furniture.

After knowing how much to save, you would divide that amount by the months you want to save, or you can choose a percentage to put towards your goal until it’s reached.

Then, make it a line item on your budget so the money will be saved and not forgotten or spent on something else. 

Save and track

Wherever you put your savings, whether separate accounts for each sinking fund or just one account, be sure to track how much you have.

Saving for ten different sinking funds at a time can stretch your money too thin, causing you to lose motivation.  

Therefore, choose a couple of sinking funds at a time to save for. Once the amount is reached for those first ones you choose, move on to the next couple.

sinking fund categories

Best place to keep your sinking funds

Most people keep their sinking funds in a savings account.

To maximize your earning potential, you could consider a high yield savings account or money market account.

Whatever you choose, just be sure you have easy access to it with no penalty for withdrawal. 

The problem with sinking funds

Sinking funds aren’t the problem; how you save for them is what can be problematic. 

Like I mentioned earlier, saving all at once for a bunch of sinking funds may stretch your money too thin, which will lead to a lack of motivation.

Also, let’s face it, sometimes it sucks not being able to spend impulsively. But, the wait is worth the reward.  

How to organize sinking funds?

First, the sinking fund should be listed as a budget item on your monthly budget. This way, the savings will actually happen.

Then, when it comes time to save, you put it into your savings account.

Now you can save two different ways.

  1. Put the month into the savings account for each individual sinking fund you need to save for.
  2. Transfer all the money into one savings account and keep track of what sinking funds you have and what the totals are.

In any case, it depends on your personality and what savings method works for you.

What is the difference between an emergency fund vs sinking fund?

An emergency fund and a sinking fund are both savings accounts, but they differ in a big way.

Emergency fund

An emergency fund is 3-6 months of expenses set aside for an emergency or something that happens that was completely unexpected. For example…

  • Car accident
  • Unexpected hospitalization
  • Lost job

Sinking fund

A sinking fund is money saved for what you want or anticipate you will need in the future. For example…

  • vacation
  • new car
  • expected car repair
  • kitchen remodel

Therefore, emergency funds are for unexpected emergencies, and sinking funds are planned expenses.  

How much should a sinking fund have

Everybody’s sinking fund savings and amounts will differ, so there is no one absolute answer. 

But, you should start planning your sinking fund at least 6 months in advance. If it’s a large ticket item, you may want to start saving a year or more ahead of time.  

Think of the end amount you want to save as you plan ahead. Then, divide that final amount by the number of months you have to save.  

Sinking Fund Apps

An app can help track your sinking funds. Below is a couple of apps that will help you reach your savings goal.

Everydollar App

Everydollar app is a zero-based budgeting app by Ramsey Solutions.

But, it has a section specifically for saving that you can use to track your sinking fund savings, which is really helpful.


Mint is a free money management app by Intuit. You can manage your budget, debt, savings, and more.  

Most importantly, you create sinking funds to track under goals, and it will even help you find a savings account to open if you need one.  


Qapital is a different kind of savings app. The app automatically withdrawals from your checking into an FDIC-insured goals account. 

Every payday, you set a percentage, and the money is then taken from your account.   

When you have met your savings goal, just transfer it back to your checking and use the money on whatever it was saved for.  

Sinking funds tracker

A sinking funds printable will help you keep track of your savings and stay motivated to reach your saving goals.  

Make sure to get your free sinking funds template below to start tracking your sinking funds.


Sinking funds will help you save and pay cash for things that aren’t typically part of your monthly budget. This way, you’re not caught off guard when it comes time to pay for them.  

Saving for these items can help you stop impulse spending, save on interest rates, and manage your debt. All of which help you achieve your financial goals.  

What sinking fund categories do you save for? Leave a comment below.

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