What is A Sinking Fund? with Catriona & Sara W

This episode of Financially Naked: Stories from The Financial Gym is hosted by Catriona and Sara W, two Certified Financial Trainers at The Financial Gym. Today, they're shedding light on the power and potential of sinking funds. What are sinking funds, and why are they important in your financial journey?

They explore the different strategies for setting up sinking funds and discuss the best places to save them. They'll share practical tips on allocating your funds wisely, whether you're saving for that dream vacation, a summer camp for the kids, or your car expenses. 

They'll show you how sinking funds can be a game-changer in helping you achieve your long-term financial goals and be a flexible and effective tool to confidently navigate your various savings goals. 

Podcast Notes

What is a sinking fund? 

  • Sinking funds are a saving technique used to set aside money for planned expenses or goals. They involve regularly setting aside a fixed amount of money over a period of time to accumulate funds for a specific goal or expense. 

  • Sinking funds help you plan and prepare for expenses, such as a vacation, a down payment on a house, car expenses, holidays, annual subscriptions, or summer camp for your kids. 

  • By saving money into a sinking fund regularly, you can spread out the financial burden and avoid taking on debt for these expected expenses. They can be set up for both short-term and long-term goals, allowing you to prepare for various needs simultaneously. 

  • These are different from your emergency fund, which is for unplanned expenses that come up. Sinking funds are for the expected expenses. 

Sinking Fund Examples

  • Some common examples of things you can save for using sinking funds: 

    • Travel

    • Car maintenance, registration, and insurance 

    • Childcare expenses like summer camp, sports, or other activities

    • Holiday planning for gifts, travel, or hosting. 

    • Larger purchases like a new laptop or cell phone 

    • Annual subscriptions for your business like Canva or Squarespace  

    • For homeowners, a fund for repairs or upgrades

    • Family planning  

What are the benefits of using sinking funds? 

  • Sinking funds help you achieve your financial goals by helping you save for anticipated expenses. They provide financial stability and peace of mind as you can be prepared for expected costs. 

  • They provide financial stability and peace of mind as you're prepared for expected expenses. This is money that you are saving with the intention of spending. It allows you to say yes to things without anxiety or guilt. 

  • Sinking funds are not just for bills. These funds can be used to plan for the fun things you want in life. 

  • If you feel fear or anxiety about money, some of those negative feelings can be mitigated by having savings and being prepared. 

Tips to get the most out of sinking funds

  • Sinking funds should be a separate goal from your emergency fund. A High Yield Savings Account is a great place to keep these savings. 

  • Automate where possible. Once you know how much you need to save, set those deposits or transfers up automatically. 

  • Give these accounts specific names so you know exactly what the money's for. This also helps motivate you to keep the money in that account for those specific purposes.  

  • Ally is a favorite among trainers and clients at The Gym because they have an excellent bucket system where you can have multiple buckets within one account and customize various settings to automate. 

If you want to work with a Certified Financial Trainer to help set up your sinking funds, schedule a free warm-up call today! If you have any ideas or questions for the show, send an email to trainerpodcast@fingyms.com.

Resources

Meet The Trainers

Meet Catriona Williams, Level 2 Certified Financial Trainer 
Meet Sara Willi, Level 2 Certified Financial Trainer 

The Financial Gym Team Comment