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I like to think of sinking funds as next-level budgeting. You’ve managed to put together a budget that allows you to survive payday to payday whilst putting some aside. Now with these sinking fund categories, you’ll be prepared for anything that may come your way.
Now before we dive in, I want you to know that you don’t NEED to have all of them. For example, I don’t have any pets, so that section is irrelevant to me. You might have kids so you can gloss over that section.
Basically you don’t need all 30+ sinking fund categories to be a budgeting pro. Start by introducing one or two and see how you get on. You might find that you need some now, but in a year or two they won’t be relevant. Likewise, some will be needed short term and others long term. Flexibility is the key.
Annual expense sinking fund
Car insurance
A simple one that can save you money. Put the money aside for your car insurance each month and then pay it in a lump sum the next time it is due.
Council tax
This is a big one and more of a stretch goal than one I would start with. But it would get it all out of the way in April.
MOT
A cheap one, potentially, but you can put a couple of pounds away each month to cover it. If you think your car might need some work, then stash a little extra to cover that bill.
Boiler service
One for the homeowners and an important one too. Not a massive expense but something that you can spread out to avoid the surprise you get when you realise it is that time of year again.
Train/bus pass
If you commute via train or buss, it normally works out cheaper to buy a pass. It works out cheaper still the longer that pass last. Start saving for the next one now and you could save yourself some money.
Car tax
You can pay it monthly or you can pay it all in one go when you set up a sinking fund. Once again it works out cheaper if you go for the annual lump sum option.
Annual event sinking funds
Christmas
I feel like this one is a must for everyone. It can be so expensive and so many get into financially sticky situation because of it. Work out how much Christmas costs you and stick that amount in a sinking fund each month.
Birthdays
This is particularly relevant for kids who tend to have some sort of celebration every year. But if you have a significant birthday coming up, then it might be worth creating a fund for that too. This can cover presents, parties, decorations, meals out, etc.
Holidays
If you like to get away once or twice a year, then planning is your friend. Separating out your holiday savings from your emergency fund is good too. Just don’t forget to budget for the spending money and new clothes you’ll want too.
Other religious events
The above are the main events that are celebrated in our household but if you have other (costly) events, then create a new sinking fund category for these and get saving.
Home Sinking Funds
Redecoration
All of us like to give our home a little spruce up from time to time. Therefore keeping a redecoration fund going means that you have the money there whenever the urge to grab a paint brush strikes.
Insurances
From home insurance or contents insurance or any insurances that you have for specific items in your home chances are that you have the option to pay for them annually. Set up a sinking fund for this now and you might be able to pay less on renewal day.
Repairs/Replacements
Things break around the home all the time, particularly when you’ve got kids. (Am I right?) You might want to create sinking funds for replacing old appliances, but also for things that get damaged due to general wear and tear. This can include plates, light bulbs, glasses etc.
Children’s sinking funds
Clothes
Kids grow out of clothes all the time, but you aren’t necessarily replacing them every month. However, if you set up a regularly payment for this to go into a sinking fund you can spread out the cost. It won’t make your eyes water the next time you open their wardrobe and realise you’ll have to replace the whole lot.
School expenses
School is really expensive even when it is free. There are uniforms, non-uniform days, fundraising events, school trips and days when they need some obscure yoghurt pot for a school project. It all adds up.
Other kids’ birthday parties
I am really NOT excited about the return of kids parties when the lockdown is fully lifted. There go your weekends and you’ll be emptying your bank account to buy presents. A few quid set aside for this each month will save you scraping the bottom of your bank account to buy another arts and crafts kit for a kids you’ve never met.
School dinners
If you want your child to have school lunches, then you are likely budgeting for this already. But it can help to spread the cost over the holidays too. Just to take a bit of pressure off during term time.
Education
Thinking further ahead for your kids, are you saving for university? This is probably one of the biggest sinking funds for most parents to think about and it makes sense to start thinking about it now.
Pet sinking funds
Food
Buying your pets food in bulk could work out cheaper. So setting up a short term sinking fund for the month will mean that you have the money available to buy a larger order rather than paying the more expensive smaller quantities.
Treatments
Some treatments won’t be covered under your insurance, so having a spare pot of cash there to cover these will mean that you are able to keep your pet in good shape.
Grooming
One particularly for the dog owners, but other pets might need the odd trim and tidy up too. Setting aside a few pounds a month would mean that you can keep your pooch looking smart.
Kennels and catteries etc
Now you could tie this one into your holiday fund, but if there are other times that you go away (work for example), then you might want a separate fund to cover the costs of keeping your furry friends looked after whilst you are away.
Medical sinking funds
Prescriptions
Unfortunately, the need for some form of medication in our lives is pretty much a guarantee. You might even be someone who has regularly prescriptions that you need to pay for. Having the money aside for this can take the pressure off making that appointment.
Dentists
We all need a check up at least once a year, and likely some other form of treatment too. Even if you are lucky enough to find an NHS dentist there will still be some costs involved.
Therapy
With waiting lists for mental health support being as they are, and only the most needing of cases being treated, some of us are seeking private therapy treatment. You might budget this with your expenses if you go regularly, but if it is just once every now and again a sinking fund might be worthwhile.
Glasses
Getting your eyes checked can be costly, if you are liable to pay for the test, the frames and the lens. If you like me, you’ll probably want a second pair too in case the kids get their hands on them or you leave them on the car seat and sit on them. Basically, create a sinking fund to cover them.
Hearing appointments
Not something everyone needs to think about, particularly if you are young. But if you are considering private treatment for hearing loss then this can be expensive too. Plus, hearing aids need replacing every few years.
Alternative treatments
This can be anything else that you use to help manage your health. From massages to acupuncture, if it is something that you pay for infrequently then it is a good idea to start saving for it now.
Personal
Gym memberships
This is another great example of something that can be paid for annually and that will save you money. If you gym membership is a non-negotiable for you, then go set up that sinking fund.
Skincare
As a woman firmly in a 30s, I have noticed the cost of my skincare regime increasing faster than my age. But I do tend to buy in bulk to keep costs down and save on delivery. A few quid aside every month means that I don’t need to borrow it from other areas of my budget.
Hairdressers
Again another one that happens every couple of months (or less if you are me), but can take a huge chunk out of your budget. To make sure that you don’t have to miss out and reschedule get that fund set up.
Relaxation
We are firmly in the world of luxuries now, but that is fine. A budget is not about restricting but more about enabling, and a sinking fund for that spa day is a perfect example of this.
Fun
Not a sinking fund as such, but every budget should have some money for fun. It is a good idea to set this up for every member of the family so that they can have some guilt free spends.
