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Where do you park your sinking funds?

March 12th, 2018 at 09:21 am

I never paid attention to these sorts of conversations before, because I was a financial mess and figured I'd never get to the pro-active point in money management since I was mired down by anxiety and reactivity.

Fast forward to current situation where we are much better and stable (despite uncertainties) and I have started a sinking fund for future car expenses. It's $25.50/month so that we can pay for three car registrations in February 2019.

So my question now is: Do you park your sinking funds in an additional external account that you make transfers to monthly?

Also, opinion on laddering CDs as a safety measure? This is something that my father did with my grandmother's funds years ago. Did Ima Saver do this too?

Any and all opinions appreciated.

Also what other categories do you plan for? All of our insurance premiums are monthly. I am thinking to add for gifts and maybe insurance deductibles in case of a car accident or incident.

12 Responses to “Where do you park your sinking funds?”

  1. Bluebird Says:

    Hi Laura, I park our sinking funds in our savings account and transfer to checking as needed (same bank). Our categories are quarterly utilities, real estate taxes for 5 properties, tax estimates, gifts, life and disability insurance, household repairs/maintenance, summer camp, Christmas, gratuities, lawn/garden and vacation. Our vehicles are provided by our employers, so we don’t have a sinking fund for car repairs or replacement.

  2. laura Says:


    @ Bluebird. Thanks for the info share. We are just out of the gate, graduating from a paycheck-to-paycheck existence. I'll slowly be able to add categories and fund them! Sounds like you have a good system in place! Smile

  3. crazyliblady Says:

    I park the sinking funds at a separate institution from the checking account so they are not "too" accessible. I have funds for emergency savings, house maintenance, car replacement, professional, medical, tax preparation, car tax/aaa membership, and escrow. I also have a slush fund at the same institution where the checking is.

  4. rob62521 Says:

    We actually opened separate accounts at a local credit union. Although we can pay for a car outright, we often get a loan just to keep our credit cards a little higher and we normally pay it off a little early. Going through the credit union saves us money on interest rates.

    We ladder our CDs.

  5. debtfreeme Says:

    I save mine to an online account where I can have separate account for tracking:
    Car maintenance 100/month

    Insurance and renewal 175/month

    Health care $15 this covers a copay at doctor office. I keep saving just in case I have multiple in a month like when I got the flu last month and needed meds.

    Glasses/contacts 50/month. Covers contacts for a year and the copays for glasses. I make sure my glasses never go over the insurance limit.

    House maintenance 50/month

    left over utilities - varies. (My highest bills are 3 summer months and 3 winter months. When I don't need the amount I budget for all utilities I put the left over into a saving account for the rare months when I do go over. Nice to know I have coverage if it goes to high like when I was sick and the heater ran for a week+ when it is usually off while I am at work.)

    college 50/month (covers classes I may want to take for fun at a local college)

    vacations 50/month

    gifts 100/month

  6. creditcardfree Says:

    Our sinking funds are currently in our main checking account. I used to use a second checking account at the same bank, but with YNAB, I don't look at the account to see what we have to spend, I look at YNAB. I originally started with car registration and insurance. Over time, we have added birthday's, Christmas, and renter's insurance. Just this year with the help of YNAB I have figured out how much we spend on vehicle maintenance in an average year. I'm now saving for those things monthly as well. And I have added college tuition as I have come to need to cash flow more things.

    We have CDs. They were not opened originally to be laddered, but they have been opened at different times, so yes, they mature in such a way.

  7. Bluebird Says:

    Just to add, CCF and I have commented on sinking funds before (originally from Mary Hunt's book)...it does take time to establish several categories. I started sinking funds over 20 years ago, so it becomes habit after awhile. You'll do great and really like it!

  8. snafu Says:

    Sinking funds are very specific to your circumstances as a terrific solution for intermittent or irregular bills and long term goals like vehicle replacement. As wage earners dropped regular savings habits, banks promoted a separate, 'special' account for Christmas spending. That theory spread to holiday/vacation spending. As teachers who were paid only 10 months, it was our responsibility to have funds to take care of expenses for July, August until September 30.

    These days with banks charging fees for services that had been free, I suggest you verify potential fees. You can easily transfer sums electronically with a few computer strokes. If you're using YNAB it will track projects. A simple EXCEL spreadsheet will track allocation of sums in a savings account. If a new event is planned, divide the pays by the event's budget/cost and adjust regular costs. What [hidden] fees do your insurance charge for the convenience of paying monthly? Is it significant?

  9. PatientSaver Says:

    I'm not familiar with that term, "sinking funds," but thanks to snafu for explaining. It's a good idea; someday, you will have a big enough emergency fund that you don't need a dedicated sinking fund, although you can still have a fixed amount of money automatically transferred each month.

    When I was first starting out in life and not knowing much yet about mutual funds, I got into laddering CDs and basically chased the best rates at banks all over the country. Later, when my income began to grow, I had little use for CDs because I was investing for growth with mutual funds.

    Now, approaching retirement years, I find myself back into CDs, mainly because of their guaranteed safety, but yes, I have laddered them as rates are expected to gradually rise. These days my laddered CDs are with Barclays Bank (online). Some will be coming due this year and I'll likely put them in new CDs at Barclays or elsewhere, if competitive. For me, a CD is a parking place in a very safe neighborhood, and it acts as ballast for my overall portfolio, which still has a healthy stock exposure.

    I would sit down and figure out (with the help of online asset allocation risk tolerance calculators, if needed) your comfort level and decide on what portion of your overall investments/savings you want to put in CDs, since they are illiquid until maturity (assuming you don't want to pay a penalty). You won't get much in the way of interest if you stick with 1 or 2-year CDs. On the other hand, interest rates are expected to slowly rise with several incremental Fed rate increases. So this in itself would be a good reason to ladder your CDs, spreading your available money into multiple CDs so you can take advantage of rising interest rates as they mature.

  10. PatientSaver Says:

    Also, you can find the best CD rates in the country at bankrate.com

  11. FrugalTexan75 Says:

    I use YNAB so it doesn't matter (too much) where my money is located. I have one main checking account where the majority of our money is located - paying 3% interest. Then the rest is in smaller accounts paying 4-5% or earning signup rewards. I like to make my money work for me. Smile Look up Kassasa checking to see what is available for you (high interest)

  12. ceejay74 Says:

    I never used the term "sinking fund" but I did for a long time set aside money each month for annual/sporadic recurring expenses such as homeowner insurance, CSA, Xmas and bday gifts, and vacations. I just kept them in my checking account and had them as a line item in my spreadsheet so I'd consider that money allocated and not available funds.

    Now I do an annual budget and pay annual expenses that month (or, if it's a bit much for one month's income to handle, spread it over two or three). But the sinking fund method (if that's what it was) served me very well for several years!

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