BUDGETING
Sinking Funds: What They Are, Examples, Categories and How to Calculate Them
Car insurance, Christmas, a new phone, the annual Amazon Prime renewal: none of them are emergencies, yet they wreck the month they land in. A sinking fund spreads each one into small monthly amounts. Here's what to save for, the formula and a calculator for your own list.
MEANING
What is a sinking fund?
A sinking fund is money you set aside a little at a time for a specific expense you know is coming. You know roughly how much and roughly when; you just don't want to pay it out of one paycheck. The term comes from corporate finance, where companies put money aside regularly to repay a bond. In a personal budget it works the same way, only for bills, gifts and repairs.
You can name it
"Car registration in March", not "something might break".
It isn't monthly
Annual, quarterly or one-off costs that don't fit a normal month.
It has a target
An amount and a date, so the monthly saving can be calculated.
It's earmarked
Tracked apart from spending money so it isn't used by accident.
NOT THE SAME THING
Sinking fund vs. emergency fund vs. savings
| Sinking fund | Emergency fund | Long-term savings | |
|---|---|---|---|
| For | Expected expenses | Unexpected events: job loss, medical bills, urgent repairs | Goals years away: house deposit, retirement |
| Timing | Known date, usually within a year or two | Unknown | Years |
| Spent | On purpose, then refilled | Only in an emergency | At the goal |
| Example | $900 car insurance due in May | Three to six months of essential costs | Down payment fund |
The practical difference: when the car insurance bill arrives, a sinking fund pays it and the emergency fund stays untouched. Without sinking funds, predictable bills become "emergencies" and drain the real safety net.
THE MATH
Sinking fund formula
Monthly contribution = (Target amount β Already saved) Γ· Months until the expense
A $1,200 car repair budget for next October, starting now with $0, is $100 a month. If you already have $300 put aside, it's $75. Round up so you finish a little early rather than short.
For annual bills, the target is simply last year's bill plus a margin for price increases. For irregular items like car repairs, use what you spent over the last one or two years divided into a yearly figure.
WHAT TO SAVE FOR
Sinking funds categories and examples
Car
- Insurance premiums
- Registration and inspection
- Tires and repairs
- Next car
Home
- Maintenance and repairs
- Appliances and furniture
- Property tax or HOA dues
- Moving costs
Annual bills
- Subscriptions and memberships
- Software and domains
- Professional fees and licences
- Tax prep
Family & celebrations
- Christmas and holidays
- Birthdays and weddings
- Back to school
- Kids' activities
Health & personal
- Deductibles and dental
- Glasses and contacts
- Clothing
- Haircuts and gym
Travel & pets
- Vacation
- Visiting family
- Vet visits
- Pet insurance and boarding
Start with three to five funds for the bills that hurt most, usually car, Christmas and annual subscriptions, rather than twenty funds you can't fill. For the holidays specifically, see how much to spend on Christmas gifts.
| Sinking fund | Target | Months away | Monthly |
|---|---|---|---|
| Car insurance (6-month premium) | $900 | 5 | $180.00 |
| Christmas | $1,000 | 12 | $83.33 |
| Car repairs | $1,200 | 12 | $100.00 |
| Vacation | $2,400 | 10 | $240.00 |
| Annual subscriptions | $360 | 12 | $30.00 |
| Total | $5,860 | $633.33 |
Illustrative amounts. Use your own last year's bills as targets.
YOUR LIST
Sinking funds calculator
TRY IT
How much to save each month
Replace the examples with your own funds. Nothing you type is saved or sent anywhere.
Enter your funds.
KEEP SCORE
Track sinking funds in Excel or Google Sheets
A sinking fund only works if you can see each balance; otherwise one savings account becomes one big pile. A short table does it:
| Column | Formula or entry |
|---|---|
| Fund / target / due date | What it's for, how much, and when you'll need it |
| Saved | =SUMIF(Transactions[Fund],A2,Transactions[Amount]) from a deposit log |
| Months left | =MAX(1,DATEDIF(TODAY(),DueDate,"m")) |
| Monthly contribution | =MAX(0,ROUNDUP((Target-Saved)/MonthsLeft,0)) |
| Progress | =MIN(1,Saved/Target) formatted as % with a data bar |
| Total monthly | =SUM(MonthlyContribution), to put into your budget as one line |
When you spend from a fund, log it as a negative amount in the deposit log, so the balance and the next monthly contribution update automatically. If you use a zero-based budget, the total monthly figure becomes one category there.
WHERE TO PUT IT
Where to keep sinking fund money
One savings account + a spreadsheet
Simplest to run: all funds in one high-yield savings account, with the split tracked in a sheet. Works well as long as you update the sheet with every deposit and withdrawal.
Separate accounts or sub-accounts
Some banks let you open several savings "buckets". Harder to dip into the wrong fund, but more accounts to manage. Check fees and any withdrawal limits first.
Short-horizon money belongs in cash: a savings account or similar, not stocks. A fund you need in eight months shouldn't depend on the market that month.
Sinking funds are one line of a bigger plan: put every annual bill on a 12-month calendar with a yearly budget for 2027, and watch the overall result in a net worth spreadsheet.
A holiday sinking fund is what makes a Black Friday budget work: the cash is already set aside before the deals start, so nothing goes on a card.
READY-MADE TRACKER
Prefer a sinking funds tracker that's already built?
You can build the table above yourself. If you'd rather enter deposits and see every fund's progress straight away, there is a ready-made tracker for Excel and Google Sheets; check the product page for current features and requirements.
Sinking Funds Tracker Template Excel & Google Sheets
The current listing describes unlimited custom savings goals with target amounts and dates, automatic tracking of deposits, real-time progress showing saved and remaining amounts and when you'll reach each target, a dashboard of all goals, and multi-currency support with conversion to your base currency.
- Custom goals with targets and dates
- Automatic progress tracking
- Dashboard of all funds
Product features and compatibility are listed on the product page and may change.
Browse personal finance templatesFAQ
Sinking funds questions
What are sinking funds?
Money set aside in small regular amounts for a specific, expected expense, such as insurance, holidays or car repairs, so the cost doesn't land on a single month.
How do you calculate a sinking fund?
Subtract what you've already saved from the target amount and divide by the number of months until you need the money. Round up to finish early.
What are examples of sinking funds?
Car insurance and repairs, Christmas and birthdays, annual subscriptions, home maintenance, medical deductibles, vacations, back-to-school costs and pet care.
Is a sinking fund the same as an emergency fund?
No. A sinking fund is for expenses you expect; an emergency fund is for events you can't predict. Keeping both stops planned bills from draining your safety net.
How many sinking funds should I have?
As many as you can actually fund. Most people start with three to five for their biggest irregular bills and add more later.
Should sinking funds be in a separate account?
Not necessarily. One savings account plus a spreadsheet that splits the balance by fund works; separate buckets make it harder to spend the wrong money.
Sources and further reading
- CFPB: An essential guide to building an emergency fund
- Investor.gov: Sinking fund provision
- Google Docs Editors Help: DATEDIF
- Microsoft Support: DATEDIF function
Checked October 2026. This article is general information, not financial advice.
