What You Need To Know About a Sinking Fund 

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.

Sinking funds can be a gamechanger for individuals and households. It is a valuable tool to add to your financial toolbox for savings.

What Is A Sinking Fund?

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.

A Sinking Fund For Your Household

Sinking Fund Vs. Emergency Fund

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.

Swipe up now for more  financial tips!