PortioOpen appGuides · By the Portio team ·
What is a sinking fund? Calculator and categories
A sinking fund is money you set aside a little each month for a cost you already know is coming. Insurance, school fees, a holiday and gifts are not surprises: they arrive every year, around the same date. Divide each one by twelve, save that amount monthly, and the bill is paid for before it arrives. Type your yearly costs to see the monthly amount.
- Insurance20%50
- School or courses40%100
- Gifts and holidays30%75
- Repairs10%25
These come to 3,000 a year. Set aside 250 a month and each one is paid for before it arrives. Without that, the largest lands as 1,200 in a single month.
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How is it different from an emergency fund?
| Sinking fund | Emergency fund | |
|---|---|---|
| For | costs you can see coming | costs you cannot |
| Examples | insurance, school fees, gifts, car service | job loss, medical bill, urgent repair |
| Size | exactly what the cost will be | three to six months of basic costs |
| Used | every year, on purpose | rarely, and refilled after |
Mixing them is the common mistake. If the yearly insurance is paid from the emergency fund, the fund is empty when a real emergency comes. How to size that one is in how big your emergency fund should be.
Which sinking fund categories should I have?
Anything that is certain but not monthly:
- insurance paid once a year
- school fees, books and uniforms
- holidays and festivals, with the gifts and travel they bring
- car service, tyres and yearly registration
- yearly subscriptions and memberships
- home repairs and replacing things that wear out
- taxes paid once or twice a year
Go through last year's bank statements once. Every large payment that surprised you belongs on this list.
How do I work out the amount?
Add up the year, divide by twelve.
| Cost | A year | A month |
|---|---|---|
| Insurance | 600 | 50 |
| School or courses | 1,200 | 100 |
| Gifts and holidays | 900 | 75 |
| Repairs | 300 | 25 |
| Total | 3,000 | 250 |
Setting aside 250 a month covers all four. Without it, the school fees alone land as 1,200 in a single month, on a salary that did not change.
What if the bill is due in less than a year?
Divide by the months you have left, not by twelve. A bill of 600 due in four months needs 150 a month now. After you pay it, drop back to 50 a month for next year's.
The first year is the hardest for this reason. From the second year on, every fund is already running.
Should each cost have its own account?
No. One separate account or pot is enough, with a short note of how much of it belongs to each cost. What matters is that it is not in your daily account, where it looks like money you can spend.
If your bank lets you name several pots for free, one per cost is easier to read. It is a convenience, not a requirement.
Where does it fit in my budget?
Treat the monthly amount as a bill. It is not optional spending and it is not savings: the money is already spent, only later.
So it comes out on payday, with rent and power, before the rest is split. In the example, bills of 1,050 become 1,300 with the sinking fund included. The full order is in what to do on payday.
What if a cost turns out higher than I saved?
Pay the difference from the month's spending money if it is small, and raise the monthly amount for next year. Prices go up most years, so add a little margin when you set the amount.
If it turns out lower, leave the extra where it is. It gives next year a head start.
Is it worth it for small amounts?
Yes. The point is not the size of the fund, it is that your months become even. A salary runs out early mostly in months with a cost nobody planned for, as described in why your salary runs out.