Our Little-Known Savings Hack We Could Never Live Without

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**This post was updated on 10/05/18

What the Heck is a Sinking Fund?

Do you ever wish you had that little pot of gold at the end of the rainbow? Of course you do. If they’re being honest, everyone does, myself included! But take a moment to close your eyes and imagine what it would be like if you could actually find that pot of gold. Now, open your eyes. Are you smiling? You should be, because today you will read about how you can create your own pot, or even pots, of gold.

Before you begin thinking, “This sounds either crazy, or too good to be true,” keep reading. The idea is that you are opening one or more accounts for a specific future purpose or replacement of a depreciated asset.


These are called SINKING FUNDS, and most online banks will allow you to set up such accounts with no minimum balance to maintain, no hidden fees, and they pay you interest at a lot higher rate than at most banks with physical branches in local communities.


Note: Don’t worry too much about the interest rates. They are higher for online banks vs traditional banks, but let’s be honest with ourselves here: we are talking about a whopping 0.50% better interest rate. This means for every $1,000 you have in savings, you earn an extra $5 every year. Yippee…


Money Tip: Right now you can open a CIT Savings Account with $100 opening deposit and earn 22x more than the national average.


Sinking funds can help you save money simply by paying your bill from the funds you’ve accumulated in them while avoiding the high interest charges you would get from paying with a credit card. Basically, think of your sinking fund as a replacement for your credit card. 


Proactive vs Reactive


Sinking Funds are Proactive

The number one habit of highly successful people is that they are proactive. They don’t wait for life to happen to them, instead they happen to life.

When you plan ahead and open a sinking fund for a future expense, you’re being proactive, and you are being awesome with your money!


Credit Cards are Reactive

If being proactive is a habit of the highly successful, then the opposite must also be true. Credit cards (when not used properly) are reactive. Any time you have an unexpeted expense and you don’t have the money, you end up going into debt using your credit card. No bueno.



What Sinking Funds Should You Start With?


1. Vacation Fund

If you long for a trip to paradise but don’t think you’ll ever be able to afford it, a sinking fund could be the way you can finally fulfill that dream. Once you are able to meet your monthly financial needs, you can start putting a little “extra” money aside at the end of each month.


Related Post: The Top 80+ Side Hustles You Can Start Today


Another option is to fund your vacation sinking fund throughout the month whenever you notice a surplus in your bank account. The idea is that putting it into your sinking fund right away will prevent you from spending it on some other type of splurge in the meantime.

2. New Car or Car Repair Fund

Often people don’t think about saving for a new vehicle until their current one is beginning to show some age or wear and tear. However, at that point it is nearly too late. The time to begin saving for a new car is immediately after buying one. A new car sinking fund may also be able to prevent you having to pay a sucky car payment each month for years to come.

The average monthly car payment is $482. If you made this payment into your sinking fund for 20 months, you would have almost $10k to buy another car. This is why proactive people have sinking funds 🙂

Saving for repairs on your car, new or old, is also a good idea that could prevent you from having to go into debt debt in order to fix your main mode of transportation.

3. Christmas/Birthdays & Gifts Fund

This is one account you may have thought of right away when we first mentioned sinking funds because so many people have seen ideas on Pinterest and other social media channels that suggest you save a certain amount each week to end up with a tidy sum by Christmas for gifts.

But instead of socking cash away in a drawer or a jar, why not let it build interest and add up more quickly in your sinking fund savings account? Plus you’ll be less tempted to dig in there and “borrow” some to pay for something other than what your sinking fund is meant for.

4. Home Repair/New Appliance Fund

Even if you don’t take vacations, don’t have a car, and don’t celebrate holidays with many gifts, you might still need this sinking fund. Just about everyone has been hit with unexpected repair bills from a refrigerator that suddenly stops working, or a washing machine that quits. So you call a repair person and get it fixed, or purchase a new one.

But, where does that fit into your monthly budget? The answer is “nowhere” unless you’ve been saving for it in a sinking fund. Even those who rent instead of owning a home will likely have to shell out for new things around their home once in awhile, so a sinking fund for household repairs and upgrades is still a good idea for renters.

5. Medical Co-pay Fund

Unless you have been asleep for the past few years, you are surely aware of the rising costs of medical care. Not only are medical facilities and pharmacies charging more than ever before, but insurance premiums are going up as well. A sinking fund could be a way to save for the co-pay and/or deductible from an unexpected medical bill you might experience.

You never know when you’ll have to have an emergency surgery or end up going into the critical care clinic when you get sick on the weekend. Having money saved in a sinking fund will at least allow you some peace of mind so you can focus on your health instead of how to pay for these unexpected expenses.

Related Post: How Health Share Programs Will Save You Thousands on Health Care This Year

We are all Different…

Chances are you are unique and awesome in your own special way, so why not set up a sinking fund for what makes you different? Here is a list of unique sinking funds that may fit into your life as well. And, don’t you be judging just yet..these are ones Chris Peach has actually seen!

  • Travel Home Fund
  • Party Fund
  • Weightlifting Supplement Fund
  • Diet/Weightloss Fund
  • New Boobs Fund
  • Beer Brewing Fund
  • New Pool Fund
  • Vegas Fund
  • Boob Reduction Fund
  • Concert Fund
  • (Online) Dating Fund
  • Your ______ Fund 🙂


Theses are just some  ideas for different things you could open sinking funds, however the 5 listed above are a great place to start.

I’m sure you have other ideas going through your mind right now as well. But regardless of the reason or name of your fund, you should start a sinking fund or two today and create your own little pot of gold. You’ll be glad you did!



17 replies
  1. Amanda Valdez
    Amanda Valdez says:

    Hi Peach! My husband and I are still planning on hiring you once his work picks up and we have the funds to do so, and let me tell you we can’t wait. I’m so done being broke haha! But anyways, since I have no idea how all of this works, how many accounts do financially responsible people have? And is it good to have them all in one bank? I always wonder how to save up for certain things but I didn’t know if having multiple accounts was what people did lol. Thank you, love your blog and read it everyday!

    Also, my coaching slots are filling up quickly, so head over to http://www.moneypeach.com/coaching and I can get you on the schedule for May/June

    • Peach
      Peach says:

      Hi Amanda! There isn’t a set number of Sinking Funds because everyone will always be a little different. We have 9 right now, but I have coached people with only 1-2 and some with 10+.
      The biggest take-away here is to have enough for you to simplify your savings so when ______ comes up, you have money for it. What are some things you can think of right now that are 100% coming up that will hurt your budget? Start there 🙂

  2. Catherine Alford
    Catherine Alford says:

    We don’t call ours sinking funds, but we have used targeted savings accounts for a lot of different things in the past. Right now we are working on moving, which is something we set up a special savings account for a few months ago and started funneling money into. Now we are so glad we had that money put away for our move.

  3. Hannah
    Hannah says:

    A few ideas for sinking funds that we plan to open (just starting this whole thing!) are:
    1.Tax fund- My husband is in land sales and a 1099 employee so we need to set aside our taxes from each paycheck.
    2. Weddings Fund- I’m one of 33 first cousins so you be knowin’ wedding season is every season round here and we need to have money for travel and gifts.
    3. Boat fund- Because we will most likely be selling our current one to pay off debt and would like to have another in the future! 🙂

    • Peach
      Peach says:

      Hannah, I’m excited for your family! You are both taking incredible amounts of action towards your own financial goals and the future looks incredibly bright for you. It has been great working with you 1 on 1 and I can’t wait to see what is next for you both !

  4. Ben
    Ben says:

    I have never heard of the phrase ‘sinking fund’ before, however we do use funds. We have * funds; an emergency car repairs fund, christmas fund, anniversary fund, holiday fund, new iPhone fund and bless others fund.

  5. MLP
    MLP says:

    Been doing this for years. Built an Excel Monthly Budget back during my pre-retirement days and I am still using it 7 years into retirement. Health Care, Appliance replacement, Car Insurance(including Deductible built in), Rent, car payments, and last but not least a “Fun Fund”. Remember, no robbing Peter to pay Paul!


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