Find the bills that ambush you
Go through the last twelve months of statements and list everything that was not a monthly bill: insurance, registrations, memberships, school costs, gifts, repairs. Those are your sinking funds.
Worked example
Car insurance $1,380 a year, registration $84 and holidays $900 come to $2,364 a year. Divided by 12, that is $197 a month.
If a bill is due sooner than twelve months away, divide by the months left instead. A $600 bill due in 4 months needs $150 a month until then.
Where to keep the money
A separate savings account keeps it out of daily spending. One account with a list of what each dollar is for works fine; you don't need an account per fund.
Sinking fund or emergency fund?
A sinking fund is for costs you can predict. An emergency fund is for the ones you can't, like a job loss or a medical bill. Keep them apart so planned costs never drain your safety net.
Try the calculator
Run your own numbers in the free sinking fund calculator for yearly bills. It works in your browser and nothing you enter is saved or sent.
Do it in Wrenfold
Wrenfold's bill calendar and savings goals let you set each yearly bill's amount and due date and see how much to set aside each month. Wrenfold is the budgeting app we make. Your data stays in a file on your own device, and you can try it free in your browser with up to 60 entries.
Sources
Common questions
How many sinking funds should I have?
As many as you have predictable non-monthly costs. Most households have five to ten.
What if I can't fund them all?
Fund the biggest and soonest first, then add the rest as room opens up.
Should sinking funds be in a separate account?
It helps. A separate savings account, or labelled sub-accounts if your bank offers them, keeps the money from blending into everyday spending.
This guide is general information, not financial, tax or legal advice. Rates, fees and rules change, so confirm current terms with the lender, store or agency involved. All dollar figures are invented examples.