Sinking Funds & Why I Use Them

I have mentioned sinking funds on different occasions on this blog and have used them for a while. They are beneficial for saving for annual expenses that you know will be ‘spendy’ or something important you need to save for.

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If you haven’t heard of sinking funds, basically they are a saving tool to help you save weekly or monthly toward big purchases, holidays, or expensive times of the year such as Christmas. Set the budget you want to achieve for the event, then work out how much you need to save each week or month to achieve it and put that money aside on pay day. Christmas is a big one for us, and without a sinking fund we’d struggle with the large outlay in one go. Putting a little away each month minimises the financial strain and stress.

Like I said, our main sinking fund for 2022 is Christmas. We’d usually have a holiday one too, but the pandemic has thrown us all through a loop. We have set a £400 present budget for Christmas, and that is a lot for us as a one income family. We like to have our money saved by November 1st, so we can use it in the Black Friday sales and ensure we get the toys our children ask for before they sell out.

I worked out that we need to save £9.30 a week from January 1st until November 1st to achieve this. That’s approx £37.20 a month. If I can make some of this up by selling old items, selling some crafts, or saving in other areas, I certainly will do.

I have even drawn up a visual savings tracker as I prefer to see my savings visually. It’s nothing fancy, but it works for us and goes on the inside of my kitchen cupboard door.

Do you have sinking funds or is there another method you use to save for events such as birthdays and Christmas?


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