5 Sinking Funds Every Family Needs to Have!

It’s the end of the month and all of a sudden you remember that your car registration is due in a week.  But you didn’t prepare for it.  What do you do now?  This is where sinking funds can set you up for success.

What is a “sinking” fund you ask?  Sinking funds are funds that you set aside for expenses you know come around every year like clockwork or you know is coming up.  It could be anything from homeowner’s insurance, your kid’s sport’s fees, or even a Winter vacation on the horizon.  Oh and let’s just add Christmas in there since that is coming up.

The more you can plan and save for these expenses, the less your budget takes a hit.  So what are the 5 sinking funds that every family needs to have?


Owning a home can be expensive.  Things break and repairs have to be made.  But oftentimes, we don’t have any money set aside for those costly repairs, therefore having to take money from our Emergency Fund.  While an Emergency Fund is for emergencies, wouldn’t it be great if we had “x” amount of dollars saved for these types of expenses?  There are a couple of rules of thumb that can help guide you while budgeting for the unexpected.  I like to use the one percent rule with my clients.  You should set aside 1% of your home’s value every year.  For example, if your house is worth $250,000, you’d need $2500 per year.


Just as with owning a home, owning a car can become costly too.  Our vehicles need tires, or oil changes, car washes, yearly registration, insurance, and general maintenance.  Wouldn’t it be far easier to save monthly for these types of things so when the time comes, we’re ready.  For example, if you know your registration every year is $180 a year, and you think you’ll need tires in the next year worth $400.  That’s $580.  Over the course of a year, that’s about $50 a month you could save and be ready for those expenses when they come.


Kids are expensive!  We all know that.  Start putting a little back each month for different things like sport’s fees, camp fees, school pictures, field trips, clothing, etc.  These items add up and can be a HUGE expense that can take a hit on your budget.  More than a third of families — 37% — say they plan to spend over $1,000 per child on school and after-school activity fees this academic year, and 20% of families plan to shell out more than $2,000 per kid, according to a recent survey by Capital One.


With Christmas (for example) just shy of 3 months away, there’s no reason Americans shouldn’t be saving for the holidays.  The average American who celebrates Christmas spends a little over $1,000.  This up from about $967 last year.  So why not plan ahead now.  Determine how much you want to budget and divide by 3 (months).  If you get paid bi-weekly, divide by 6.  This will be the amount you need to save every other week.  It has been determined that people who decide on an amount to spend and budget for it, are more likely to stick to that amount than someone that just passively buys gifts without a plan.  This can also include birthdays and anniversaries.


We LOVE our pets!  They are like family!  They need food, grooming, flea treatment, and sometimes medical attention.  But do we really plan for these expenses?  No.  Why not add up everything you’ve spent in the last six months to determine an average.  Save that amount each month so that your “Pet Sinking Fund” is ready when the expenses arise.

It has been reported that 86% of people do not plan in advance for expenses they know are either coming up or repeat themselves.  Just imagine what it would feel like if you already had the funds in your budget to pay for these expenses!  It would definitely free up more cash flow for that month that could be spent on other things such as entertainment or a vacations.

So the next time you have anything left over from your paycheck, consider putting it towards a sinking fund.  If you’d like to know more ways on how to be intentional with your money, schedule a free mini-session with me and I can show you a better way to manage your money day to day!



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