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Sinking fund

Definition

Money saved gradually for a known, planned expense, such as insurance premiums, holidays or car maintenance, so it doesn't hit your budget all at once.

Formula

Monthly amount = (Target − Already saved) ÷ Months until the expense

Example

A $1,200 annual insurance bill due in 12 months needs $100 a month.

Try the numbers

General educational information, not personal financial advice. See our disclaimer.

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