---
title: "What is a sinking fund? Save for the bills you know are coming"
description: "What a sinking fund is, what to use one for and how much to save each month, with a worked example and 2024 data on the yearly bills that catch people out."
author: "Wealtie Team"
published: 2026-10-10
updated: 2026-10-10
category: "Saving"
canonical: https://wealtie.com/blog/sinking-fund
---

# What is a sinking fund? Save for the bills you know are coming

A sinking fund is money you put aside each month for a cost you know is coming but don't pay monthly, like car insurance, a car service or holiday gifts. Divide the bill by the months until it's due and move that amount on payday.

## Key takeaways

- A sinking fund is money saved each month for a cost you know is coming but don't pay monthly, like car insurance, a car service or holiday gifts.
- The monthly amount is the cost divided by the months until it's due, so a bill six months away needs twice as much a month as one twelve months away.
- In 2024 the average US household spent $1,993 on vehicle insurance and $984 on vehicle maintenance and repairs, about $248 a month between them.
- The first year costs the most: once a fund has paid its bill, it refills over a full twelve months.
- Keep sinking funds apart from the emergency fund, so a bill you planned for doesn't shrink the money meant for one you didn't.

## What is a sinking fund?

A sinking fund is savings for one cost you can see coming: you know roughly what it'll be and when it lands, but it doesn't arrive every month. Car insurance paid once a year. A car service. A yearly subscription, the vet, holiday gifts.

Without one, each of those bills comes out of whatever month it lands in. The month with the insurance renewal goes over budget, the gap goes on a card, and the next month starts behind. A sinking fund turns each one-off hit into a small, steady monthly amount.

The name comes from company finance, where a sinking fund is money set aside to repay a bond. If you live in a block of flats or a condo, the sinking fund in your service charge or HOA fees is the building's reserve for big repairs. Same idea, different owner. This post is about your own.

## How is a sinking fund different from an emergency fund?

An emergency fund is for costs you can't predict; a sinking fund is for the ones you can. A boiler that breaks in January is an emergency. A car insurance renewal every June isn't, even if it feels like one when the letter arrives.

Keep the two apart. If the insurance comes out of the emergency fund, the emergency fund is smaller on the day something does break. If you have no emergency fund yet, start there: [how much should be in an emergency fund](https://wealtie.com/blog/how-much-emergency-fund) sets the first target at one month of income, and the [emergency fund calculator](https://wealtie.com/tools/emergency-fund-calculator) shows how many months it takes to get there. Sinking funds come next, for the bills you already know about.

## What should you have sinking funds for?

Any cost that's predictable, too big to absorb in one month's budget, and doesn't come monthly. For most households, the car tops the list.

In the US Bureau of Labor Statistics' Consumer Expenditure Survey for 2024, the average household spent [$1,993 on vehicle insurance](https://data.bls.gov/timeseries/CXU500110LB0101M), [$984 on vehicle maintenance and repairs](https://data.bls.gov/timeseries/CXUCAREPAIRLB0101M) and [$880 on pets](https://data.bls.gov/timeseries/CXUPETSLB0101M). Those are averages over all households, including the ones without a car or a pet, so if you have both, your own numbers are probably higher.

![Bar chart: in 2024 the average US household spent $1,993 on vehicle insurance, $984 on vehicle maintenance and repairs and $880 on pets.](https://us-1-s3.polodev.net/wealtie-blog-media/posts/2026/10/bar-chart-in-2024-the-average-us-household-spent-1-993-on-f40595e2ca.webp "Source: U.S. BLS, Consumer Expenditure Surveys (2024)")

| Cost | Average per household, 2024 | Per month, saved evenly |
| --- | --- | --- |
| Vehicle insurance | $1,993 | $166 |
| Vehicle maintenance and repairs | $984 | $82 |
| Pets | $880 | $73 |
| **Together** | **$3,857** | **$321** |

Other common ones: yearly subscriptions and memberships, birthdays and holiday gifts, back-to-school costs, a trip, a professional fee or licence, and a new phone or laptop when the old one gives out. If you're self-employed, tax is the biggest of all; the guide to how to [budget on irregular income](https://wealtie.com/guides/irregular-income-budget) covers setting it aside.

:::callout{type="note"}
**In the UK:** the ONS [Family Spending survey for April 2024 to March 2025](https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/datasets/familyspendingworkbook1detailedexpenditureandtrends) puts the average household's vehicle insurance at £14.30 a week, repairs and servicing at £9.60 and pets and pet food at £6.80. Over a year that's about £744, £499 and £354, or £62, £42 and £29 a month. Like the US figures, they're averages over every household, with a car or without.
:::

## How much should you put in a sinking fund each month?

Divide the cost by the number of months until it's due. A 1,200 insurance bill due in six months needs 200 a month; the same bill twelve months away needs 100.

A worked example, in round numbers that work in any currency. It's January and four bills are coming this year. You save at the start of each month, including the month the bill is due.

| Fund | Cost | Due | Months to save | This year, per month | From next year, per month |
| --- | --- | --- | --- | --- | --- |
| Car service and tyres | 600 | April | 4 | 150 | 50 |
| Car insurance | 1,200 | June | 6 | 200 | 100 |
| Vet and pet costs | 360 | any time | 12 | 30 | 30 |
| Holiday gifts | 900 | December | 12 | 75 | 75 |
| **Total** | **3,060** | | | **455** | **255** |

The first year is the expensive one. Bills that are close get fewer months, so they cost more per month. Once a fund has paid its bill, it refills over a full twelve months, and the total here drops from 455 to 255 a month.

Costs without a date, like the vet, get a yearly amount split over twelve months. If the bill comes before the fund has caught up, pay what the fund holds and the rest from that month's budget.

If 455 a month doesn't fit, save what you can toward each fund. Whatever's in a fund on the due date is that much less to find in a single month.

## Is it too late to start a holiday sinking fund in October?

No, but each month costs more. In the National Retail Federation's [2025 holiday survey](https://nrf.com/media-center/press-releases/consumers-to-spend-second-highest-amount-on-record-according-to-nrf-holiday-survey), people in the US planned to spend $890.49 each on gifts, food, decorations and other seasonal items, $627.93 of it on gifts.

Saved from January, $890 is $74 a month. Started in October, with two paydays left before December, it's about $445 each.

The same survey found 42% of shoppers planned to start before November, and the top reason, given by 54% of them, was to spread out their budget. A sinking fund spreads it further: set it up in January for next year, whatever this year looks like.

For this year, set the total first, then divide it by the paydays left. If the result won't fit, the number to change is the total.

## Where should you keep sinking funds?

In a savings account separate from your everyday one, so the money doesn't get spent by accident, but easy enough to reach on the day the bill is due. Most people keep all their sinking funds in one savings account and a note of how much of the balance belongs to each.

The note can be a list on your phone or a spreadsheet with four columns: fund, target, due date, saved so far. Update it when money goes in and when a bill is paid. Some banks let you split a savings account into named pots, which does the same job.

## How do you track sinking funds in Wealtie?

Add the savings account that holds your sinking funds as its own account in Wealtie. Moving money into it on payday is a transfer between your accounts, so it isn't counted as spending, and the balance shows up in your total in the [net worth tracker](https://wealtie.com/features/accounts).

The Free plan includes 2 accounts, enough for an everyday account and one savings account holding every fund. Pro has unlimited accounts, if you'd rather give each fund its own and skip the note.

For the bills themselves, the [bill tracker](https://wealtie.com/features/recurring) adds each one as a recurring transaction that logs itself on its due date. The Free plan includes 1 recurring transaction; Pro has unlimited.

## Questions people ask

### How much should you have in a sinking fund?

Enough to pay the bill in full on its due date. Save the cost in equal amounts over the months until then: a 900 bill due in nine months needs 100 a month. For costs without a date, like vet bills, set a yearly amount and let the balance build.

### How many sinking funds should I have?

Start with one to three, for the biggest bills that don't come monthly. Car insurance, car repairs and holiday gifts are the usual first ones. Add more once those are running and the monthly total still fits your budget.

### Do sinking funds count as savings?

Yes, they're savings and they count toward your net worth, but they're already spoken for. Don't count them toward your emergency fund or a savings goal, because the money leaves on a date you already know.

### Is a personal sinking fund the same as a building's sinking fund?

No. In a block of flats or a condo, the sinking fund is the reserve the building collects through the service charge or HOA fees for big repairs like a roof or a lift. A personal sinking fund is your own savings for your own bills.

### What if I saved more than the bill cost?

Keep the difference in the fund and lower next year's monthly amount, or move it to your emergency fund. Check the new price before each renewal, since insurance premiums change from year to year.

## Sources

1. [Consumer Expenditure Surveys: Vehicle insurance, average annual expenditure, all consumer units (series CXU500110LB0101M)](https://data.bls.gov/timeseries/CXU500110LB0101M) (U.S. Bureau of Labor Statistics, checked 10 October 2026)
2. [Consumer Expenditure Surveys: Vehicle maintenance and repairs, average annual expenditure, all consumer units (series CXUCAREPAIRLB0101M)](https://data.bls.gov/timeseries/CXUCAREPAIRLB0101M) (U.S. Bureau of Labor Statistics, checked 10 October 2026)
3. [Consumer Expenditure Surveys: Pets, average annual expenditure, all consumer units (series CXUPETSLB0101M)](https://data.bls.gov/timeseries/CXUPETSLB0101M) (U.S. Bureau of Labor Statistics, checked 10 October 2026)
4. [Family spending workbook 1: detailed expenditure and trends, financial year ending 2025 (Table A1)](https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/datasets/familyspendingworkbook1detailedexpenditureandtrends) (Office for National Statistics, checked 10 October 2026)
5. [Consumers to Spend Second-Highest Amount on Record, According to NRF Holiday Survey](https://nrf.com/media-center/press-releases/consumers-to-spend-second-highest-amount-on-record-according-to-nrf-holiday-survey) (National Retail Federation, checked 10 October 2026)

*This article is general information, not financial, tax or legal advice. Your situation is your own; check the numbers that apply to you before you act on them.*