Sinking Fund Categories That Will Help You Create A Better Budget

Sinking Fund Categories That Will Help You Create A Better Budget

Have you heard of something called sinking fund categories? Actually, come to think of it, have you ever heard of the term sinking funds? 

Don’t worry if you haven’t -contrary to the name, it is not a warning sign that appears before your funds start to sink. 

Don’t you wish they taught you this stuff in school?!

Don’t worry!  I will teach you all about the importance of sinking funds, types of sinking fund categories, where to find sinking fund calculators, printables, and envelopes.

This blog post will cover all of that and more. Are you ready to dive into the world of savings?


Some of the links on here are affiliate links and I may earn if you click on them, AT NO EXTRA cost to you. Hope you find the information here useful! Thanks.

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What Are Sinking Funds?

Before we get into sinking fund categories, let me first explain what sinking funds are. A sinking fund is a type of savings account that you use to set aside money for a specified period of time for a planned expense.

Not to be confused with an emergency fund, which is a type of savings account you put towards for those “just in case” moments or emergency expenditures.

Sinking funds are different. They are designed to help you save an allotted amount of money each month towards a specific financial goal.

Why Do You Need Sinking Funds?

So why do you need a sinking fund? Why not just dip into your savings account? Having a sinking fund can save you from dipping into your emergency fund, taking out credit cards for payments, or loans.

For instance, here are examples of sinking funds and their uses. Let’s say your best friend is expecting and you’re in charge of hosting the baby shower in a few months. 

How are you going to pay for it?

Do you double down on your budget? Pay it off with your credit card and rake up debt? Tap into your savings? 

You could but there’s a better way to do it without scrambling for a fast and last-minute exit option or draining your savings accounts. 

That is where a sinking fund comes in! 

Because you had a heads up and the time to save, you can intentionally set aside money each month for this hypothetical baby shower. 

By the time the event comes up on the calendar, you’re financially prepared for any and all costs. 

Essentially, a sinking fund will help you:

  • Manage your monthly budget and avoid overspending
  • Build a healthy money-saving habit
  • Plan ahead for any expenses -big or small that aren’t usually part of your normal budget
  • Set and reach financial goals
  • Spend money without triggering buyers’ remorse or financial guilt (no one likes feeling this way and you’re more likely to avoid this when you set up a sinking fund)

How Do You Organize Your Sinking Funds?

If you’ve never heard of sinking funds or thought of using one before, then I’m not going to lie, there is a little bit of a learning curve but all good things come to those who try.

The name may allude confusion and head scratching but it’s actually really simple.

  • First, you have to choose your sinking fund categories we’ll cover these in a bit. 
  • The next step is to decide how much money you want to save to reach your goal for every category. You could start with one sinking fund category or choose a few.
  • Then, you need to calculate how much money you’ll need to set aside each month to reach these financial goals.
  •  And finally, you need to review your budget to see how much you can afford each month.

Are you still following along? Don’t worry, there are going to be sinking fund examples littered throughout this article -you’ll get the hang of it.

For example, here’s what a sinking funds example would look like if you had $500 a month to add to your sinking fund categories:

  • $100 a month for home renovations
  • $100 a month for a holiday
  • $100 a month for medical expenses
  • $100 a month for automobile payments
  • $50 a month for presents or gifts
  • $50 a month for your children’s or pet’s expenses

At the end of the year, you would have saved $6,000 in total:

  • $1,200 for home home renovations
  • $1,200 to spend for a holiday
  • $1,200 to cover your medical expenses
  • $1,200 to cover your automobile payments
  • $600 to put towards presents or gifts
  • $600 to put towards your child or pet’s extra expenses

Having that amount saved in each sinking fund category means that you have the money to pay for any of those situations without dipping into your emergency funds, other savings accounts, or charge the payments to your credit card when the time comes.

Sinking Funds Categories 

On to the main event, sinking fund categories. I mentioned a hypothetical baby shower sinking fund you could set up but there are many types of sinking fund categories. 

You can make categories for any future expenses you may need to factor in but here are a few of the more common sinking fund categories:

Home Expenses Sinking Fund

If you are a homeowner then housing is most likely one of your biggest expenses. If that is the case, having a home expenses sinking fund is on top of the list.

What would this entail? Things like:

  • House maintenance 
  • Home repairs or renovations
  • Landscaping or outdoor maintenance
  • Pool maintenance (if you have a pool)
  • Extra utilities costs

Automobile Sinking Fund

If you’re an avid public transport user, then you can skip this one but if you’re not then chances are you will have some automobile related expenses to cover.

When you’re setting up your automobile sinking fund, try to include these subcategories:

  • Insurance 
  • Car repairs and maintenance
  • Vehicle tax
  • Replacement parts (tires, batteries, headlight, etc.)
  • Annual check-ups

Dependant Expenses Fund

If you’re a parent, you have a pet or someone that is a dependent, you’ll know that there can be surprise costs here and there -and it can be expensive as heck. 

Creating a separate dependent expenses fund is just smart. Think of including these subcategories in your dependant expenses sinking fund:

  • Care expenses (daycare, childcare, home care, etc.)
  • Clothing related expenditure
  • Insurance plans
  • Medical expenses
  • Activites (sports, hobbies, dog walking services, etc.)

Medical Expenses Sinking Fund

Health care is essential and a basic human right but it can set you back quite a bit if you don’t have the insurance coverage or you’re uninsured. 

Setting up a medical expenses fund is a smart move if you have to pay the costs straight out of your pocket. Consider these costs when you’re setting up this sinking fund category:

  • Prescription medication
  • Doctors visits
  • Medical tests
  • Dental visits
  • Eyecare (you might need glasses or contact lenses)


Some people can afford insurance and some can’t. If you have insurance but you feel the pinch each month, consider setting up an insurance sinking fund. 

Some insurances give deals depending on when you make the payment -monthly or bi-yearly. If the bill is due in six months or at the end of the year, you can figure out how to set aside each month to cover the final costs.


Let’s say your beloved fur-baby destroys your furniture or your child accidentally toppled over your beautiful bookcase. 

A lot of the time people pay out of pocket or turn to credit cards to make payments for furniture but putting aside a furniture sinking fund category will take this stress off your shoulders.

Yearly Renewals

Don’t have a house, car, or dependants but you have yearly renewal costs that you’re struggling to pay?

 If you have a subscription based service taken out at the end of the year for memberships or anything of the like, it would make sense to plan for this expense and set up a sinking funds category for this expenditure.


If you live in a country that experiences the changing of seasons, you’ll notice the heating bill skyrocket during the colder times of the year or your water bill goes through the roof during the warmer months. 

One thing you can count on is that the seasons will change and you’ve noticed the pattern, so what can you do to prepare for these coming months?

Set up a utilities expenses sinking fund category and have that money ready in your fund for when the time comes to turn up the heating.

Pet Care Fund

I have a cat that I love to bits but when she gets sick, I’m the one stuck with the bill. 

This happens but if you have a sinking fund for this category then it can take the sting away when making those payments. Try and factor in costs like:

  • Routine veterinary check-ups
  • Emergency care
  • Prescription medication
  • Pet-sitting or boarding services (or sign up for a house sitting website for free)
  • Food, treats, and toys

Holiday and Birthday Sinking Funds

This one may seem like a no brainer but you’ll be surprised how handy this little sinking fund category is. 

When the holidays roll around or someone’s birthday is approaching, it can be disheartening to look at your bank balance and see you don’t have the means to afford a gift.

When you set up a sinking fund for holidays or birthdays, you don;t ever have to worry about dipping into your pockets to pay for these gifts. 

You can include these expenditures in your sinking fund category:

  • Birthday gifts and cards
  • Seasonal holiday gifts
  • Decorations (seasonal, birthday, holiday)
  • Holiday or birthday food spending
  • Shipping and postage fees 

Travel Fund

I love to travel and I often save up for big trips but having a travel sinking fund means you can allocate money to other parts of your trip like:

  • Visa fees
  • Rentals (motorbike, car, etc.)
  • Travel insurance
  • Souvenir, food, activity costs
  • Money to spend for fun!

Personal Care Sinking Funds

We often place importance on other forms of expenditure we deem worth saving up for but what about us? 

We’re important and personal care falls under one of the essential sinking fund categories if you ask me. Put some money aside for yourself; this will help manage your emotional and physical health.

Set up a personal care sinking fund and save up for:

  • A trip to the salon
  • Spa visits
  • Massages
  • Gym memberships
  • Beauty products
  • Treat yourself to clothes or anything else you’ve had your eye on

Essential Sinking Funds 

I’ve listed a whole bunch of sinking fund categories and you can create some specific ones for your own financial goals but here are the top five essential sinking funds categories you should consider having:

  1. Personal Care Sinking Funds

One of the essential sinking fund categories I think everyone should plan for is personal care. 

People can be tough on themselves when life is already no walk in the park and if you have buyers remorse or guilt for spending money on yourself, setting up a personal care sinking fund is a great way to counteract that. 

You can’t feel bad for spending money on yourself when it’s there for specifically that reason right?

  1. House Sinking Fund

If you own a home then this sinking fund category is an essential one of the essential sinking fund categories you should consider. 

Now, I’m not in the business of telling you what to do with your money but setting up this sinking fund category if you’re a homeowner will save you from collecting debt or dipping into your emergency fund when unexpected expenses arise.

“But I’m insured, I’ll be fine!”

Maybe so, but be sure to read the fine print, not everything will be covered by insurance and at some point, you will be faced with costs associated with repairs or damage to your property.

While it can be difficult to predict what kind of damages you’ll need to prepare for, one way to prepare for these costs is to anticipate them (you know your property best, if that pipe bursts every year, you know what to expect next year). 

Look over your insurance plan and prepare for costs you know your insurance won’t cover.

  1. Vehicle Sinking Fund

If you own a car or vehicle of any kind, you’ll know how expensive it can be. From costs of gas, to insurance premiums, registration fees, car payment -the costs keep piling up and this can be daunting.

Setting up a vehicle sinking fund can put you in control of your finances.

 You can use this sinking fund for maintenance or upkeep and costs or you could set up a sinking fund in this category to buy a car if you don’t have one.

  1. Health Care Sinking Fund

If you’re insured and your insurance covers almost everything, then you could set up a sinking fund to go towards your payments to the providers. 

But if you have terrible insurance or none at all, then setting up a health care sinking fund is an essential step.

At some point or another, you’ll need medical care and this can be expensive. 

Sometimes you find you won’t be able to afford the costs and the last thing you want to do is charge the payment or take out loans.

 Having money set aside in a health care sinking fund ensures that you are prepared and ready to pay for any health costs that you may incur in the future.

  1. Gift Sinking Fund

You can’t get around this sinking fund category. Unless you’re a hermit and you have zero people in your life or holiday cheer, choosing to set up a gift sinking fund just makes your life easier.

It takes the stress away during the holiday season and you don’t get a heart attack when you see your bank balance after Christmas gift shopping or birthday present hunting. 

This won’t just prepare you for the costs of those gifts but depending on the amount in your account, it could also help you set a budget and decide how much you’re willing to spend on gifts in total.

Why Do They Call It a Sinking Fund?

We have covered what a sinking fund is, why you need one, sinking fund categories, and essential sinking funds but one question still remains (for me at least) –why is it called a sinking fund? 

How could your funds be sinking if in fact they are actually rising with savings?

Contrary to the name, the negative term in “sinking” funds is not a warning sign that appears before your funds start to sink. 

Sinking fund refers to an amount of money allocated to settle long-term debts. In traditional circuits, the term “sinking” refers to the decreasing levels in debt as the amount is paid off.

Looking for the best accounts for sinking funds? 

A simple’ best flexible savings accounts’, will be able to find you the best bank accounts that suit your needs.

Be sure to compare the rates between banks before settling on just one. 

Like any money based decision, it’s best to do your research and stay informed about what banks have to offer you and how it can benefit your financial health. 

Sinking Funds Tracker 

Now that you know all there is to know about sinking funds, let’s talk about sinking funds tracker. 

What are they and how they can help you? 

Realizing you want to start building sinking fund categories is great but like any financial goal, having a plan and visualizing it makes the goal easier to achieve.

A sinking funds tracker is a document that will map out the specific amount of money and time it will take you to achieve your financial goal. 

To help you get started on your journey into sinking funds, here are a few for you to choose from:

Free Printable Sinking Funds Trackers: 

This free printable sinking funds tracker by budget with Rachel is not only easy to use but it’s also FREE!


All you have to do is input your name and email and the file is ready to download and print. 

Rachel explains how to use the tracker on her website and even shows an example of what a filled sinking funds tracker should look like. 

All you need to do is fill in:

  • The total amount you will need for the expense
  • How many months you have until you need the fund
  • How much you need to save per month to have your fund completed in time

Here’s an example of what a sinking funds printable looks like:

  • Sinking Funds Trackers on Etsy

Looking for personalised or arty sinking funds trackers and willing to spend a bit of money on them? 

Here are a few affordable sinking fund trackers you can purchase on Etsy (you can also search for sinking fund chart and you’ll get the same results):

Sinking Fund Calculator 

I don’t like doing math, so if I can simplify the process and make my life easier, I choose that route. 

If that sounds good to you, try using a sinking fund calculator to do the math for you. 

A sinking fund calculator helps you with the computation of the amount of money you will need to add to a sinking fund for each period to reach your financial goals and they’re pretty easy to use:

  1. Input the target sum of money 
  2. Enter your accrued interest rate
  3. Choose the compounding frequency
  4. Input the duration of periods in years and/or months
  5. Choose your currency
  6. Click on the “Calculate” button to generate the results

And tada, you’re all done. Here are a few free online sinking fund calculators for you to choose from:

Here’s an idea of what a sinking funds calculator looks like:

Sinking Funds Envelope 

Let’s say your bank charges you for every cash withdrawal you make or you want to have the sinking funds on hand in case, what better way to stash your cash in than in (and even track your progress) sinking fund envelopes.

What are sinking fund envelopes you ask? 

They are basically cash envelopes you place your funds in with an identifying image. For some, saving money can be a drag and this makes it a little more fun. 

Imagine, eventually you reach your financial goal but never need to use that money; one day you stumble on a stack of money in an envelope and it’s unlabeled. 

You spend the whole time wondering what that money was for and you squander it away on something it wasn’t meant for. The horror.

Free Sinking Fund Envelopes

This free printable sinking fund envelope package was a treasure to stumble upon. Not only are they cute, creative and free, but you have a chance to DIY them yourself with color pencils.

The free download comes in a PDF format and has sinking fund envelopes in 19 categories: 

  • Cash on hand fun
  • 3months’ expenses
  • 6 months’s expense
  • 12 months’ expenses
  • Clothes
  • Christmas
  • Wedding
  • College books
  • Sports
  • Vacation
  • Pool
  • Television
  • New bed
  • Fridge 
  • Couch
  • Phone

Affordable Sinking Fund Envelopes on Etsy

Looking for personalised, cute and artsy sinking fund envelopes for an affordable price? Have a look at these options available on Etsy:

Here’s a look at what you’ll get when you purchase a printable:


Final thoughts?

Sinking funds are not only important but they are a smart choice for your financial and mental health. 

Choosing the right sinking fund categories can take a lot of pressure off your finances and saves you from dipping into your other funds or raking up any potential debt. 

Have I convinced you yet? Let me know what other fun sinking fund categories you’d include in your plan! 

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Sinking Fund Categories That Will Help You Create A Better Budget

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