Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A known future expense that isn't budgeted for monthly in advance tends to arrive as an unplanned emergency instead, even though nothing about it was actually unpredictable. A sinking fund turns a known, lumpy future cost into a small, steady monthly line item set aside well before the bill actually comes due.
Before you rely on it
What to check
Confirm the target date and total amount are both realistic before dividing into a monthly figure, since an overly optimistic total or timeline undermines the fund's whole purpose.
The common error
Where people go wrong with sinking fund calculator
Treating a known, predictable future expense as an unplanned surprise when it arrives, rather than budgeting for it monthly in advance. The whole value of a sinking fund is converting a known cost into a small, manageable, already-planned-for line item.
Sensitivity evidence
How annual yield changes the required monthly deposit
| Annual yield | Required monthly deposit | Total new contributions |
|---|---|---|
| 2.0% | $544 | $9,799 |
| 3.0% | $539 | $9,699 |
| 4.0%worked example | $533 | $9,600 |
| 5.0% | $528 | $9,500 |
| 6.0% | $522 | $9,402 |
Every input, tested
Which input moves the required monthly deposit most
| Input | Tested from | To | Required monthly deposit at each end | Swing |
|---|---|---|---|---|
| Months until due | 13.0 months | 23.0 months | $747 to $412 | $335 (63%) |
| Future expense | $10,800 | $13,200 | $469 to $598 | $130 (24%) |
| Already saved | $1,800 | $2,200 | $545 to $522 | $23 (4.3%) |
| Annual yield | 3.0% | 5.0% | $539 to $528 | $11 (2.1%) |
Two variables at once
Required monthly deposit by annual yield and future expense
| Annual yield \ Future expense | $9,600 | $12,000 | $14,400 |
|---|---|---|---|
| 2.0% | $413 | $544 | $676 |
| 3.0% | $408 | $539 | $669 |
| 4.0% | $404 | $533 | $663 |
| 5.0% | $399 | $528 | $656 |
| 6.0% | $395 | $522 | $650 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Future expense | $12,000 |
| Already saved | $2,000 |
| Months until due | 18.0 months |
| Annual yield | 4.0% |
| Required monthly deposit | $533 |
| Total new contributions | $9,600 |
Where the inputs come from
Future expense is the amount you will need, such as a car repair, insurance premium, vacation or holiday costs, in the dollars of the due date. Already saved is what you have set aside, months until due is your timeline, and the annual yield is what the account earns. Use a real estimate or quote for the expense, and add a small cushion for cost increases. Keep the money in a separate savings account or sub-account so you do not spend it.
When the result stops applying
Costs often rise while you save, so build in a cushion. Interest at savings rates adds little on short timelines. A sinking fund is for known expenses, not for emergencies, which need a separate fund. If the monthly deposit does not fit your budget, extend the timeline or reduce the target.
What to compare it with
See the emergency reserve on the emergency fund calculator, and other goals on the savings goal and time to save pages. The 50/30/20 budget and subscription cost calculators help find the money. Automate the transfer right after payday.
People also ask
Frequently asked questions
What is a sinking fund?
Money set aside regularly for a specific future expense, so you can pay it from savings instead of borrowing or disrupting your budget.
How is a sinking fund different from an emergency fund?
A sinking fund covers planned, predictable costs, while an emergency fund covers unexpected events such as a job loss or a major repair.
What should I use sinking funds for?
Annual insurance premiums, car maintenance and replacement, holidays, vacations, home repairs, and any large expense you know is coming.