What Are Sinking Funds and Are They Smart To Have?

It can be overwhelming to learn how to manage your money and build a financially secure future. Paying down debt, budgeting, tracking expenses, saving an emergency fund, and opening investment accounts take patience and focus.

You’ve made good progress some months, but sticking to a budget and saving money has been hard. Bills and expenses always seem to come up and throw you off track.

It seems like you have to dip into your emergency fund for things that aren’t emergencies too.

You don’t have a budget line for maintaining or repairing your car, a weekend getaway for your anniversary, an overnight summer camp for the kids, and gifts for the holidays- yet you know you’ll spend money on things like this each year.

This is why it’s a smart idea to add sinking funds to both your vocabulary and your budget.

Sinking funds help prevent you from busting your monthly budget. Or taking on more debt for expected — but not regular monthly expenses.

And if you think sinking funds are just for people who are starting to build their financial house, think again.

Unless money is no concern at all, making the shift from frantic spender to prepared saver can improve your financial health and reduce your stress.