Ultimate Guide to Sinking Funds: How to Set Them Up + 35 Sinking Fund Categories

Most budgets have a plan for regular expenses, emergency savings, debt payoff, and investing.

But what about irregular expenses and those surprise expenses that aren’t really emergencies? Like car repairs, extra vet visits, and those gifts for your second cousin twice removed that you forgot to budget for?

If you’re anything like me, I would just dip into emergency savings – but that’s not what you (or I) should be doing!

This is where sinking funds come in handy.

Sinking funds can save your budget by helping you save money for those extra expenses so you don’t have to use a credit card or dip into your emergency fund.

What is a sinking fund?

A sinking fund is something that you use to save overtime for an upcoming expense.

Sinking funds can be used for any upcoming expense, big or small.

And you don’t have to use sinking funds for just things that have a predictable dollar amount, you could always use an estimate,

I know you’re probably thinking “Brittney that’s just a regular savings account…”.

You’re sort of right.

What’s the difference between a sinking fund and a savings account?

A savings account is a place where you put money. You could use it for your sinking funds, but a savings account is not automatically a sinking fund.

Think of a sinking fund as a strategy for saving, and the savings account is where everything is kept.

Wait, what’s the difference between a sinking fund and an emergency fund?

An emergency fund is for well, emergencies.

A sinking fund is for a more specific and intentional purpose.

Why use a sinking fund?

A sinking fund will help you allocate your money better and will help you not have to use credit cards or have to dip into your savings for your irregular and big expenses that you have coming up.

For example, let’s say you have a yearly HOA that’s $600.

Would you rather save $50 a month for a year for that HOA? Or wait until January have to scramble to come up with the $600 all at once?

(I’m not saying there’s a right answer…. But there’s a right answer).

How to Set Up Sinking Funds

Okay it might be tough to get started with sinking funds, but I’ll walk you through it.

The first thing you want to do is determine what kind of sinking funds you’ll need.

You if you scroll a bit, you’ll see I’ve given you 30+ sinking fund ideas to get you started.

If you still don’t know where you start, just start with Christmas or Birthday gifts.

Once you have a category (or two) that you want to start with, think about how much you’d like to save. $100? $500? More?

Then think about when you want to start saving and when you’d like to be done saving for that category.

For example, let’s say I want to save $300 for Christmas gifts. I want to start saving in Janaury, and be done with saving by the end of December.

Next, you will want to use the amount you want to save, and how long you have to save to come up with a plan.

Let’s use my example, I want to save $300 in 12 months for Christmas. So this means I need to save $25 each month.

I can break this down even more, so let’s say I get paid weekly, I need to save $6.25 each week to have $300 by the end of the year.

Next, you will want to check your budget to see if your savings plan will fit. For me, $6.25 each week is totally doable, so I’ll stick with that!

Where to Keep Sinking Funds

There are a couple of places where you can stash your sinking funds, it just depends on how you budget, how disciplined you think you are, and also how much effort you want to put in.

Savings Account at Your Normal Bank

This one is the easiest option. Just use a separate savings account at whatever bank you usually use for all of your sinking funds.

One downside to this is that you will need to make sure you have a good tracking system (if all of your sinking funds are in one account).

Another downside is that since the sinking funds are in an account at the same bank you usually use, it might be easier to move money back to your checking account without much thought.

Cash Envelopes

Do you use the cash envelope budgeting system? Or maybe you want to just keep your sinking funds separate from any debit card so it doesn’t get spent?

You could keep your sinking funds in cash envelopes!

You could keep them all in one big envelope, or you can use a separate envelope for each sinking fund.

High-Yield Savings Account

This one is my preferred option! You should open up a high-yield savings account at a bank that you don’t usually bank at.

Since it’s high-yield you will get a better interest rate (so your money make money) and since it’s at another bank, you won’t be tempted to spend it on other things.

CIT Bank has great high-yield savings accounts that you can open online!

How to Track Sinking Funds

If you only have one or two sinking funds, you might not need to do any tracking.

But once you start saving for 3-5+ sinking funds at a time, you should have some sort of tracking system.

You can use a spreadsheet to keep track of the sinking funds, including how much you’d like to have saved, how much you’ve saved so far, and how much you plan to save each paycheck.

My favorite way to keep track of sinking funds is on paper. If you’d like a free copy of my sinking funds tracker, click here (or click the image).

Image that shows an example of a pdf sinking funds tracker.

This sinking funds tracker has space for the sinking fund name, how much you want to save, the dates you’re starting the sinking fund, when you want to finish saving for the sinking fund, and plenty of room to track all of your transactions.

Sinking Fund Categories

To get you started, here are over 30+ sinking fund categories that you could use in your own budget!

For a few categories, I’ve also included possible contribution amounts so you can get an idea of how it could work for you.

If you’d like more sinking fund category ideas, you can take a look at your own budget and your bank statements. Look for any huge irregular bills and consider creating a sinking fund for them!

Car / Vehicle Sinking Funds

Anything involving your vehicle can go into this category, you could also break things down into more categories if you like.

Car Repairs

Think about the maintenance you may need on your vehicle(s) in the future. Oil changes, new tires, new brake pads?

These are the types of things you could create a sinking fund category for!

How Much To Save: You could save $50-$100 a month for this category.

Car Replacement

If you have an older car like we do (2005 Toyota….) you should consider creating a sinking fund for a new (to you) car!

How Much To Save: Depending on what type of care you have now, you could save $50-$200 a month for this category.

Car Insurance

Everyone who has a car needs car insurance! So why not create a sinking fund category for it?

You might be paying this monthly already, but some companies will give you a nice discount if you pay a six months and/or one year up front! Take advantage of the discount by using sinking funds!

How Much To Save: You could save $50-$600 a month for this category (it all depends on how much your insurance is on average).

Other Vehicle Sinking Funds

  • Tire Replacement
  • Battery Replacement
  • Car Washes
  • Car Detailing

Home Sinking Funds

It doesn’t matter if you have a house, condo, apartment, box, you should have at least ONE sinking fund for your home! Expenses will ALWAYS come up!

House Down Payment

Saving for a house? The down payment would be a great sinking fund!

How Much To Save: You could save at least $100 a month for this category.

Home Repairs

Repairs are definitely going to come up. Think about things like the water heater, the A/C, pest problems, etc. Be prepared!

How Much To Save: You could save $50-$100 a month for this category.

Big Ticket Home Items

This could be things like new appliances, new pieces of furniture, or new carpet or cabinets.


You can sometimes pay HOA (Home Owner Association) fees all at once, which makes this a great candidate for sinking funds!

How Much To Save: You could save $50-$100 a month for this category (it depends on your HOA fees).

Water Bill

If you’re someone who has the ability /has to pay their water bill monthly or quarterly, you could create a sinking fund for it.

Other Home Sinking Fund Categories

  • Home Owner’s Insurance
  • Property Taxes
  • Parking Fees
  • Lawn Care
  • Home Upgrades

Medical Bill Sinking Funds

If you have access (and the ability) you should definitely be contributing to an HSA account, but if you aren’t contributing to one, definitely consider creating some sinking funds for unexpected medical bills.

Dental Work Sinking Funds

Teeth cleanings / checkups happen about every sixth months, and if you need any other dental work done, you could create a sinking fund.

Vision Sinking Funds

Do you wear glasses or contacts? Perfect for sinking funds! You could also create a sinking fund for your yearly vision exam.

Other Medical Sinking Funds

  • Perscriptions
  • Copays and Deductibles

Child Expenses


Does your child attend private school or attend college? Consider creating a sinking fund for it. You might even be able to snag a discount for paying all at once.

Other Sinking Fund Categories For Kids

  • Daycare
  • Activities (Sports!)
  • School Supplies
  • Summer Camp

Other Sinking Fund Categories

Here are some other sinking fund categories you should consider.

Pet Expenses

Per expenses can include cost of food and treats, vet exams, and the cost of any medication needed.

Christmas Shopping

Imagine if you started saving for Christmas shopping starting in January? Wooooo! That would take a lot of pressure off wouldn’t it? And it would make it easier for you to stay on budget if you already had a sinking fund created.

How Much To Save: You could save $50+ a month for this category.

Birthday / Gift Giving

Start saving up and planning for birthday gifts and other gift-giving in advance. Don’t forget about possible gifts for things like engagements, weddings, and house-warmings.

Clothing / Shoes Sinking Fund

Create a sinking fund for clothes and shoes that you will need yearly.

Travel / Vacation

Start a sinking fund for a vacation or traveling to a conference or other event you’d like to attend. Don’t forget the cost of the event, the airfare, and any accommodations!

Yearly Renewals / Memberships

You could save up for things like Netflix, Youtube Premium, or something like HomeChef.

How Much To Save: You could save $10-$100 a month for this category (depending on the service, of course).


Some partners give themselves allowances that they can spend however they want, this would make a great sinking fund!

Charitable Giving Sinking Fund

If you’re interested in charitable giving, you could create a sinking fund so you can give in bigger chunks!

Do you already use sinking funds? If not, would you consider trying it out?

Ready to try out sinking funds?

Hopefully I’ve convinced you to work at least one or two sinking funds into your budget!

Remember to pre-plan how much you’d like to save in each sinking fund, how much you want to save each pay period, and when you’d like each sinking fund to be fully funded.

Sinking Funds Explained (Video)


FAQs About Sinking Funds

What is the purpose of a sinking fund?

The purpose of a sinking fund is to save for an expense over time so you don’t have to come up with the money all at once.

What sinking funds should I have?

It depends on your budget and expenses! I think most people should have a sinking fund for Christmas and birthday gifts though.

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