14 SINKING FUNDS YOU PROBABLY NEED

WHAT ARE SINKING FUNDS?

A sinking fund is an amount of money set aside for a specific future expense.  The account is typically funded on a weekly or bi-weekly basis so that by the time that expense is expected to happen, the money is already set aside. These are for the types of expenses that you know will be coming. They just don’t occur on a regular weekly or monthly schedule.  When they do come up, you don’t want to use your emergency fund to cover them if you fall short, because they are not really emergencies.

THE BENEFIT OF USING SINKING FUNDS

Setting up sinking funds helps you better manage your budget by having money put aside for expenses that occur periodically.  These are often the types of expenses that cause us to go over budget when they are not planned for. I like to try to keep my monthly budget as even as possible throughout the year.  It makes it a lot easier to budget to save a little bit each month for certain things. Following are a variety of expenses that you might want to consider setting up sinking funds for.

HOME REPAIRS / MAINTENANCE

If you own a home, you likely have had some type of repair or maintenance needed fairly recently.  This sinking fund might cover things like replacement filters for heating / cooling system, repair of an appliance, getting a chimney cleaned, buying a new blade for the lawn mower, or supplies for the pool in summer!

CAR MAINTENANCE

Unless you have a very new car, you will have some type of maintenance costs each year.  It’s nice to have some money put aside even just for regular oil changes and tire rotation.  At some point you will need new tires, brakes, and other various repairs.

MEDICAL CO-PAYS / PRESCRIPTIONS

This fund can be used to cover any co-pays that you may expect to pay during the year when you visit a doctor.  It can also cover co-pays on prescriptions or over the counter medicine.  I also always estimate in the cost of one emergency room visit co-pay per year just in case.  With 3 kids, I have found that we usually end up in the emergency room at least once a year.  And this year didn’t fail us! The money that was set aside for the emergency room co-pay for this year has been used for that purpose! 

ANNUAL / SEMI-ANNUAL INSURANCE PAYMENTS

This fund is used to save for any auto, homeowners or renters insurance payments that are due annually or semi-annually.  Often, you get a little bit of a discount if you don’t opt for monthly payments.  By putting the money aside each month, you will get the discount, but don’t have to be worried about getting caught unprepared when the premium becomes due.

ANNUAL SUBSCRIPTIONS / FEES

If you have any services that charge an annual fee this fund would be used to cover those.  For example, I  use this fund to cover my Amazon prime, BJs Wholesale Club membership, and Costco memberships.

PET FOOD / SUPPLIES

We have quite a few pets (2 dogs, 1 cat, 2 guinea pigs, and 1 fish at our house).  We also have 2 horses that are boarded at a farm nearby.  So, you could say we have quite a few pet expenses.  Sometimes all pets end up needing to be restocked on food or supplies at the same time.  That can have a big impact on your budget for the week.  So, by estimating your annual cost and putting aside some each week, the money is always there at the time when you end up needing to purchase things for your pets.  I always add a little extra cushion in this account too incase I need to purchase something like a new dog bed, or a silly outfit for one of the dogs that my kids might convince me to buy.

VET BILLS

Again, with the pet expenses!  If you have pets, even if they don’t have any health issues or injuries, you likely have at least an annual vet visit to get updated shots and a check-up.  These visits can be expensive!  So, having the money put aside relieves the stress that you can feel when they tell you the amount due.  I also include amounts for heartworm and flea and tick protection that I stock up on during our vet visit. 

BIRTHDAY GIFTS

This one not only helps me with making sure I have enough set aside for giving gifts, it also helps me make sure I don’t miss any birthdays.  When I set up this sinking fund, I list out each of my family members that we give a birthday gift to sorted in order by their birthday.  So, I have the person’s name and their birthday right there.  As we give gifts during the year, I fill in the amount spent next to the budget.  Then I can make sure no one was missed, and also keep track of who is coming up next.

In addition to what I expect to purchase for each birthday, I also include extra dollars for things like needing to chip in for a gift for a co-worker, say for a baby-shower, or retirement.  And I include some money for going out to dinner as we sometimes might go out to dinner for a parent’s birthday.

CHRISTMAS / HOLIDAYS

When you determine how much you need in this sinking fund, don’t forget to include things that are not specifically related to gift giving.  We often purchase special food or drinks, attend events that have an admission fee, purchase gift wrap and cards, etc.  Those can all be included when determining how much to put into this sinking fund.

CLOTHING

Even if you don’t purchase clothing often, most of us need to purchase something occasionally.  It could just be a new pair of shoes or some new socks.  I love using a sinking fund for my kids clothes.  They know how much gets put in each week, and I will only buy them up to what is available in the fund.  So, if they choose to buy something that is more expensive, they have to really make sure it’s what they want.  They know that it will limit what else they can get until more money has accumulated in the fund.

SCHOOL SUPPLIES

This can be used for the regular beginning of year notebooks, binders, pens and pencils.  But, it can also be for those things that come up during the year, like when supplies are needed for a school project. Even if you don’t have children in school, it’s good to have some money set aside for things like notebooks, printer paper and supplies.

TAKE OUT FOOD

I am really big on meal planning and cooking at home.  However, we all have those days where we literally just run out of time to be able to cook a meal.  So, it’s nice to know that there is a little bit of money set aside to order take out when needed to get you through a crazy day.

FAMILY FUN

I love this sinking fund because it allows me to do little things without having to worry about impacting my current weekly budget.  For example, if we are out for the day and the kids want a drink from Starbucks, I would use money from this fund.  Or maybe we are out and they see a board game or puzzle they would like to get.  It’s not for anything extravagant, just little things here and there.

VACATIONS

This can be used to save up for a planned vacation, or even just for general travel.  If you don’t have anything specific planned it’s still nice to put aside some money for vacations.  You can use it for a weekend getaway, or even a daytrip to somewhere local.

CONSIDER GIVING THIS A TRY, EVEN JUST FOR ONE EXPENSE

If this is new to you, consider starting small. Pick the one expense category that you find most often causes you to go over budget. Set up a sinking fund for that expense.  Estimate how much you spend over the course of the year. Put away an amount each week or month to start saving up for that cost. Don’t worry too much if you are not sure of the exact amount to save. Overtime, you will get a better handle on how much is needed.

Thanks so much for checking in! If you would like to hear the podcast version of this topic to check out Lola’s Frugal Life Podcast! Also, be sure to check out my other blog posts on this site!

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