A sinking fund is money you set aside a little at a time for a cost you know is coming. When the bill arrives, the money is already there.
An example
If car insurance costs $720 every six months, setting aside $120 a month means the bill is covered when it arrives, without a credit card or a raid on your savings.
Why it helps
- Smooths out lumpy costs into steady monthly amounts
- Keeps your emergency fund for real emergencies
- Means less credit card interest
- Turns spending you'd feel guilty about into spending you planned
General educational information, not financial advice. Clever Coin Jar isn't paid by any bank or app.