How this calculator works
A sinking fund turns bills that arrive once or twice a year into a steady monthly transfer. Until the next due date you need amount ÷ months left; after that, amount ÷ months between bills is enough to stay ahead for good.
- Set aside now = sum of (amount ÷ months until next due) for each bill.
- Once caught up = sum of (amount ÷ months between bills) — the steady monthly amount.
- Per year = sum of (amount × 12 ÷ months between bills).
Worked example
With these inputs: amount $1,200; due every … months 12; months until it is next due 5; amount $180; due every … months 12; months until it is next due 9.
The result is set aside each month now $260.00, with once every bill is caught up $115.00 a month and these bills per year $1,380.00. The first figure is higher because the nearest bill has less time to fill. It drops to the second once that bill is paid.
Why the first number is higher
A bill due in five months has only five months to fill, even though it repeats every twelve. So until it's paid you need a bigger monthly amount — $1,200 due in five months is $240 a month. After it's paid, the next one has a full year, and $100 a month keeps you ahead for good.
If you started a sinking fund a year ago you'd only need the second number. The first is the catch-up cost of starting now, and it drops as each bill is paid.
Setting one up
Open a separate savings account (or a labelled "bucket" if your bank supports them), set up an automatic transfer of the monthly amount the day after payday, and add each yearly bill with its due date to your bill tracker. When a bill arrives, pay it from the fund.
Good candidates: car insurance paid in full, registration and inspection, property tax if it isn't escrowed, homeowners or renters insurance, annual subscriptions and memberships, back-to-school costs, holiday gifts, and car maintenance.
Frequently asked questions
How do I calculate a sinking fund?
For each bill, divide the amount by the months until it's due, then add them up. In the example — $1,200 due in five months and $180 due in nine — you set aside $260 a month now.
How much do I need once I'm caught up?
Divide each bill by the months between payments. The same two yearly bills need $115 a month for good, $1,380 a year.
What's the difference between a sinking fund and an emergency fund?
A sinking fund saves for bills you know are coming; an emergency fund covers the ones you don't. Keep them separate so a planned bill never empties your emergency savings.
What bills should go in a sinking fund?
Anything that isn't monthly: insurance premiums, registration, property tax, annual subscriptions, memberships, tuition, holidays and car maintenance.
Where should I keep a sinking fund?
A separate savings account you don't spend from, ideally one that pays interest. Some banks let you create named savings buckets for each bill.