Office of Enrollment Management

Sinking Funds

Plant growing out of change

What is a sinking fund?

Major expenses can be daunting and difficult to budget for when the need arises. Using a sinking fund allows you to breakdown the larger expense into more manageable savings. Any major expense can be made into a sinking fund.  Home repairs, car replacement, gift fund, or vacation could all be made into a sinking fund.

Many banks and credit unions offer savings accounts designed for sinking funds and help you to be disciplined about saving for these expenses. How would it feel to have the money saved when it is time to paint the house or replace a car?

How to create a sinking fund?

1. Determine what the total cost of the major expense is.

2. Divide the total cost by the amount of time you have to save.

3. Automatically transfer the monthly amount into a savings account.  This will earmark, or designate, that amount to achieving this savings goal.

4. Use the sinking fund, rather than the emergency fund, to pay for the cost of the designated project when the time comes.