Sinking Fund: a fund formed by periodically setting aside money for the gradual repayment of a debt or replacement of a wasting asset. In other words, a savings account for certain holidays or events you need money for.
Everyone’s “savings” accounts will be for their own unique mixture of life. These are some examples of what mine look like.
I personally go crazy during holiday season. I LOVE buying gifts for my friends and loved ones. I enjoy making people happy. This is something that is important to me.
2. Important Birthdays/Events
Once again, I LOVE buying gifts for my friends and family so this is an important category for me.
3. Car Mainenance
I had a Toyota Corolla for 10 years. Towards the end of its time with me I was having to do a lot of maintenance on it and I didn’t have a sinking fund for this. It was coming straight out of my checks.
4. Home Repairs
I am currently in a situation where I am going to need to buy a new washer and dryer and my fence needs to be re-done. I have funds for these things because I set it aside when I receive income. I save for this goal out of every dollar I earn.
5. Pet Expenses
I have a 14 year old dog who has had 3 surgeries and needs medication daily. I have a 9 year old dog who also needs medication on a daily basis. I save up for this so I can cover it on a monthly basis.
Me and my family travel a lot under normal circumstance. I plan each trip out and set a goal for how much I plan on saving for it. Each trip is separate.
7. Medical Costs
I have this as a savings account because you just really never know. I have small children who love to play outside and we have a jungle gym so I like to be prepared.
These are MY emergency funds. These make MY life easier. I love categories. You chose your priorities.