I love sinking funds. Since adopting sinking funds into my budget and financial habits, I feel much more prepared for major expenses and experiences, and I carry far less guilt and stress around money. Anytime I hear someone stressing about a large, recurring expense, I always say the same thing: create a sinking fund.

If you’re new to sinking funds, here are some ideas to help you get started. Many of these are funds I personally contribute to regularly.

What is a sinking fund?

A sinking fund is money you set aside regularly for a specific future expense, so it doesn’t feel overwhelming when the time comes. Instead of paying for something all at once, you “sink” small amounts of money into the fund over time.

Example: Saving a little each week for a concert ticket or a new phone.

Savings are generally set aside for emergencies or long-term goals, while sinking funds are for planned expenses you know are coming.

Gifts

I put $25 per month aside for gifts, including birthdays, thank-yous, housewarmings, and other occasions that pop up throughout the year. If you want to save specifically for Christmas, take your total holiday budget and divide it by 12.

Travel

I love setting money aside for travel, even if we don’t have a trip planned. It gives us flexibility with destinations and removes the pressure of skipping a trip because it feels too expensive. For international travel, I recommend saving $3,000 to $5,000, depending on your party size and destination.

Subscriptions

Many subscription services offer a discounted rate when you pay annually instead of monthly. A sinking fund makes it easy to pay upfront without disrupting your cash flow.

Wishlist Items

I set money aside for low-priority wishlist items I’m not in a rush to buy. Even for something like a $200 purchase, having the money ready makes it feel far less guilty because I’ve already planned for it.

Bucket List

Ever wanted to cross something off your bucket list but couldn’t afford it at the time? A sinking fund makes those experiences feel achievable and intentional instead of impulsive.

Donations

I’m fortunate to be in a position where I can donate annually to organizations I care about. Before I was financially stable, I still wanted to give back and would set aside as little as $5 per month. It may not seem like much, but every dollar truly counts for non-profits.

Large Bills

I used to feel stressed when large bills, like property taxes, came due and often had to dip into my emergency fund. Creating sinking funds for predictable, annual expenses completely changed that. An expected expense should not be an emergency.

Guilty Pleasures

This is my favourite category. Whether it’s coffee dates, beauty treatments, books, or the occasional splurge, a guilty pleasures sinking fund allows me to enjoy these things without regret. When the money is already set aside, the guilt disappears, and the enjoyment increases.

Skills & Hobbies Building

I’m a big advocate for investing in your skills and exploring new hobbies. That’s why I love putting money aside for courses, workshops, or trying something new. It gives me permission to grow and explore without questioning the cost.

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Sinking funds have completely changed the way I think about spending and saving, turning stressful expenses into planned, guilt-free moments. The best part is that everyone’s sinking funds will look a little different depending on their lifestyle and priorities.

I’d love to hear from you. What sinking funds do you currently use, or which one are you thinking of starting next? Share in the comments below!