Twice a week, our CEO and resident money guru Jean Chatzky tackles your burning questions in the HerMoney newsletter. We’ve pulled some of the best to feature on our website — and this one made the cut! Got a question for Jean? Send it her way right here.
Q: Today’s question comes from Brooke. She writes: “What is a sinking fund – and who are they good for?”
A: A sinking fund is essentially a savings account where you’re incrementally saving for a goal by putting aside a set amount of money each month. Whether you’re saving $10 a month to end up with $120 at the end of the year, or $200 a month to end up with $2,400, the goal is that you’re sinking (as the name suggests) the same amount into your fund, with consistency, in order to reach a goal.
Who are sinking funds good for? Anyone with a savings goal, basically. We recently asked the ladies of the HerMoney Facebook group about where they sock away extra money. Sinking funds was a popular answer. “My credit union offers ‘sub-accounts’ within my savings, so I have sinking funds for vacation, property taxes, insurance, house maintenance, etc.,” said HerMoney reader Sonja. “The interest isn’t great at the credit union, but the goal of that money is safety, not risk and growth.”
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