Definition
Monthly savings toward a predictable irregular expense: insurance premiums, holidays, car repairs. Sinking funds are how budgets absorb annual bills without drama.
Why it matters
Most budget blowups are not emergencies, they are annual bills nobody smoothed out. Sinking funds convert December, insurance month, and car trouble from crises into line items.
Example
A $1,200 annual insurance premium becomes a $100 monthly transfer into a sinking fund. When the bill lands, the money is already there, and the emergency fund never gets touched for a predictable expense.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.