We all have something special we’d like to buy for our home or in life. Paying for these significant expenses can be challenging, but a sinking fund may pave a better way.
Many bonds now have a sinking fund managed by a trustee who oversees the fund. Money is set aside periodically with a trustee for repayment of the portion of the principal.
Someone in your family can create a sinking fund, dedicating a savings account for a specific household expense that may be too large to handle without borrowing the money.
An emergency fund is for the money you set aside in a savings account for unexpected costs you may face when losing a job, boiler breaks, or pet surgery.
The sinking fund is for saving money for a known purpose you expect to purchase in the future. Typically, your sinking fund is for a specific planned amount.
Dollars are fungible and can go into a “car or house down payment” sinking fund. You can have a sinking fund by categories such as a house, car, vacations, Holidays, Christmas gifts, or charities.