Formula
Monthly deposit = (Goal − Saved × (1 + i)n) × i ÷ ((1 + i)n − 1)
Here i is the monthly interest rate derived from the APY and n the number of months. With no interest the formula simplifies to (Goal − Saved) ÷ n.
Example: You need $3,000 in 10 months and already have $500. Without interest you would save $250 a month. In an account paying 4% APY, you need slightly less — about $245 a month (roughly $113 per biweekly paycheck).
Sinking fund ideas
- Holiday gifts: divide last year’s spending by 12.
- Car: tires, maintenance and registration.
- Irregular bills: insurance, property tax, memberships.
Building a safety net first? Use the emergency fund calculator.
Frequently asked questions
What is a sinking fund?
A savings pot for a specific planned expense. Instead of paying $1,200 for car insurance at once, you save $100 a month so the money is ready when the bill arrives.
How is the monthly amount calculated?
Without interest: (goal − already saved) ÷ months. With interest, each deposit earns interest until the deadline, so the required deposit is a little lower.
How is a sinking fund different from an emergency fund?
An emergency fund is for the unexpected. A sinking fund is for expenses you know are coming.
How many sinking funds should I have?
Common ones are holidays and gifts, car maintenance, insurance premiums, vacations, home repairs and annual subscriptions. Many banks let you create several named savings buckets.