Office of Enrollment Management

Understanding Sinking Funds

Plant growing out of change

Facing big expenses can be overwhelming. A sinking fund breaks down these costs into smaller, manageable savings goals. Whether it's car replacements or moving costs, any major expense can benefit from a sinking fund.

Creating a Sinking Fund

  1. Calculate the Total Cost: Determine the full amount needed for your expense.
  2. Divide and Conquer: Divide the total cost by the time you have to save, giving you a monthly savings goal.
  3. Automate Your Savings: Set up automatic transfers to a designated savings account. This ensures you're consistently saving towards your goal.
  4. Ready When You Need It: When the time comes for your expense, dip into your sinking fund instead of your emergency fund.

By setting up a sinking fund, you'll be prepared for life's big expenses without the stress of scrambling to cover them.