What is a sinking fund?
A sinking fund is money you set aside in small, regular amounts for one specific cost you know is coming: a car registration, an insurance renewal, a holiday, end-of-year gifts. Instead of the whole bill landing on a single paycheck, you spread it across the paydays before it's due. When the bill arrives, the money is already waiting.
It isn't the same as an emergency fund. An emergency fund covers what you can't predict, like a job loss or an urgent repair. A sinking fund covers costs you can see coming, even when they only turn up once or twice a year. The Consumer Financial Protection Bureau's savings plan worksheet asks whether you have money set aside for expenses that come one to four times a year, such as car insurance, back-to-school costs and holiday gifts. That is the gap a sinking fund fills.
In Australia, “sinking fund” also describes the capital works fund a strata scheme or body corporate keeps for building repairs. This calculator is about personal savings.
How the calculation works
For each fund, the calculator works out:
Contribution per period
(Target − already saved) ÷ contributions left before the due date
It rounds up to the next cent, so you finish on target or a few cents over, never short. Contributions are counted from your next contribution date (today unless you change it): every weekly, two-weekly, twice-monthly or monthly date that falls before the due date. A contribution on the due date itself isn't counted, because money that arrives the same day a bill is taken may not be there in time.
A fund that is already covered shows as fully funded. If the due date is today or has passed, there are no contributions left, so the calculator shows the shortfall instead.
Worked example
Say your car insurance renews in 26 weeks, it will cost $1,200 and you have $300 set aside. You're paid every two weeks and move money on payday.
| Step | Calculation | Result |
|---|---|---|
| Still needed | $1,200 − $300 | $900 |
| Contributions before the due date | 26 weeks ÷ 2 | 13 |
| Per contribution | $900 ÷ 13 = $69.23… | $69.24 (rounded up) |
| Monthly equivalent | $69.24 × 26 ÷ 12 | About $150.02 |
Leave it until there are only eight weeks to go and the same $900 needs four contributions of $225. Starting early is what keeps each amount small.
Your plan's total adds up every fund's contribution for the schedule you chose. The monthly equivalent converts it for a monthly budget: weekly × 52 ÷ 12, every two weeks × 26 ÷ 12, twice a month × 2. The total drops as funds are paid out, so recalculate after each due date or when a price changes.
Common sinking fund categories
Start with costs you know are coming but don't pay every month. These are the categories people set up most often:
| Category | What it usually covers |
|---|---|
| Car | Registration, insurance renewal, servicing, maintenance and repairs |
| Home | Home or renter's insurance, property taxes or council rates, maintenance, replacing appliances |
| Health | Dental work, glasses, deductibles and other out-of-pocket costs |
| Travel | Flights, accommodation, travel insurance, trips to see family |
| Gifts and holidays | Christmas and other festive spending, birthdays, weddings |
| Subscriptions and memberships | Annual software and streaming plans, gym, professional or club fees |
| Kids and school | Fees, uniforms, excursions, back-to-school supplies |
| Pets | Vet check-ups, vaccinations, pet insurance, boarding |
| Replacements | A phone, laptop or furniture you know will wear out |
You don't need all of them. Begin with the costs that are due soonest and the ones that would hurt most if they arrived unfunded, then add more as your budget allows.
How to track sinking funds
There are three common ways to keep the money separate. Each works if you keep it up to date.
- A separate savings account for each fund. The clearest separation, because each balance is the fund. It can mean more accounts to manage, so check fees and minimum balances first.
- One savings account with labelled balances. Keep a simple sinking funds tracker, such as a spreadsheet or notebook, that splits the account into funds. The fund balances should always add up to the account balance; check once a month.
- A budgeting app. Some apps let you earmark money for a goal so it stops looking spendable. Whatever you use, money already assigned to a fund shouldn't also count as spending money.
Australia's Moneysmart budget guide suggests including irregular costs such as car repairs, annual bills and pet costs in your budget. A sinking fund tracker is how those line items become money that is actually there.
Mistakes to avoid
- Forgetting irregular annual bills. Go through the last 12 months of bank and card statements and list everything that isn't monthly. Once-a-year renewals are the easiest to miss.
- Using averages instead of due dates. Dividing a yearly bill by 12 only works if you start 12 months out. If it's due in four months, you need a quarter of what's left each month, not a twelfth. The due date drives the math.
- Counting the same money twice. Money in a sinking fund is already spoken for. Leave it out of what you treat as available to spend.
- Never updating the target. Prices change. When the renewal notice arrives, enter the real amount and recalculate.
- Spreading too thin. A few dollars in fifteen funds can leave every one of them short. Fund the nearest, most important costs first.
Marnie / iPhone and Android
Keep sinking funds out of your spending money
The calculator tells you how much to set aside. Marnie, a money app for iPhone and Android, helps you keep that money out of everyday spending. Create a savings goal with a target date, and the money you reserve for it is left out of Safe to Spend, so it doesn't look like money you can use. Bills and recurring payments are planned ahead, so upcoming costs show up before they're due.
Marnie doesn't link to your bank or move money for you. You make the transfers yourself; Marnie keeps track of what's set aside and what's left to spend.
Download Marnie