Money set aside gradually for a specific, planned future expense.
Unlike an emergency fund (for surprises), a sinking fund is for known upcoming costs — a car replacement, annual insurance premium, holiday spending — divided into manageable monthly deposits instead of one shock.
Example: A $1,200 annual insurance bill becomes a $100/month sinking-fund deposit.
FAQ
What is Sinking Fund in simple terms?
Unlike an emergency fund (for surprises), a sinking fund is for known upcoming costs — a car replacement, annual insurance premium, holiday spending — divided into manageable monthly deposits instead of one shock.