What Is a Sinking Fund?
In personal finance, a sinking fund is money saved gradually for a specific, planned future expense, such as a car replacement, annual insurance premium, holiday, or home repair. Setting aside a fixed amount each month spreads a large cost over time instead of paying it all at once.
How to Calculate the Monthly Amount
Monthly amount = target cost ÷ number of months until the expense. A 1,800 expense due in 12 months needs 150 a month.
Sinking Fund vs. Emergency Fund
A sinking fund is for known, planned costs; an emergency fund is for unexpected events.
Business Meaning
In corporate finance, a sinking fund is money a company sets aside to repay debt, such as bonds, over time.
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🔗 Related Terms
More Personal Finance Terms
- 50/30/20 Rule
- Bill Splitting
- Checking Account
- Consumer Price Index (CPI)
- Cost of Living
- Credit Union
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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.