How many sinking funds do you actually need?

For most households, five to seven — one for each irregular cost you can already name, not one for every category you can imagine. A sinking fund only works if you can say what it is for and roughly what it costs a year, which is exactly why the number stays small and the names stay specific.

Last updated: October 2026

What is a sinking fund, exactly?

A sinking fund is money you set aside every pay for something that does not arrive every pay. Car registration. The quarterly electricity bill. Christmas. The vet. All of it is spending you already do — the fund just moves the decision earlier, to a calm moment, instead of leaving it to the week the bill lands.

That is the whole idea, and it is deliberately unglamorous. A sinking fund is not an investment, it is not an emergency fund, and it does not make you any money. It changes a surprise into a transfer.

How do you work out the amount?

Three steps. Name the cost. Find what it is a year. Divide by 12 if you are paid monthly, or by 26 if you are paid fortnightly.

Here is a full worked example — seven funds for a household with one car, one pet and a December that happens every single year:

$736.41 a month is a confronting number the first time you see it, and that is the point of writing it down. It was always being spent. It was just being spent in lumps, in months that then got blamed on something else.

How many sinking funds should you have?

As many as you can name without pausing. That is a genuinely useful test, because a fund you cannot name is a fund you will not fill.

Seven is a lot for one household and it still fits on half a screen. The failure mode is not having too few — it is building nineteen funds in January, including "home maintenance", "future tech", "clothing replacement" and "miscellaneous annual", and then never putting a dollar in any of them because the set-aside is now larger than your take-home.

If the total is more than you can move each pay, do not delete funds. Rank them and fund them in order. Which brings us to the next question.

What if you cannot afford the full set-aside yet?

Then fund the ones with dates on them first.

Car registration has a date. Council rates have dates. The electricity bill has a date. Christmas has, famously, a date. Those go first, because missing them has consequences that cost money. "Future tech" and "clothing" have no date, so they wait — and waiting is a decision you have made on purpose rather than a thing that went wrong.

A partly funded sinking fund is also not a failure. If the car service costs $480 and the fund has $310 in it when the car goes in, you are $310 better off than the version of this where you did nothing. Nobody fails a sinking fund. They just have less of it than they wanted.

Should sinking funds live in one account or several?

One account is fine. Several is fine. What matters is the list, not the plumbing.

The reason is simple: the bank does not know which $310 of the $2,400 sitting in your savings account is the car service. Only your list knows that. A single savings account with a seven-line tracker beside it behaves identically to seven separate accounts, with less admin and fewer logins. If your bank does sub-accounts or "spaces" and you like them, use them — it is the same list, just rendered by somebody else.

What does not work is a savings account with no list. That is how a car service and a holiday get paid for twice out of the same money.

Do sinking funds work on a fortnightly pay?

Better, actually. Dividing by 26 gives you a smaller number more often, which is easier to move and easier to not notice.

The one thing to watch is the two months a year that contain three pays — on a fortnightly cycle, twenty-six pays will not fit inside twelve months, so twice a year a third pay lands in a month your budget thinks has two. If you have never planned for those, the third pay is where a stalled sinking fund can be caught up in a single transfer. That is a problem worth solving on its own terms, and we have written about the fortnightly pay cycle in detail.

Which spreadsheet does this?

The Complete Edition ($29) has a Sinking Funds tab with a withdrawals log, so you can see what each fund holds and what has been taken out of it, alongside net worth and a percentage-of-income view. The AU Fortnightly Edition ($24) has the same sinking funds tab plus the per-fortnight bill smoothing and three-pay-month handling described above.

If you are not there yet, you do not need either. Seven lines on paper and one savings account will do this perfectly well, and the Simple edition ($19) has savings tracking you can use the same way. Buy the tool when the habit is annoying you, not before. If your income moves around as well, budgeting on an irregular income is the other half of this problem.