Sinking Funds: What They Are, Examples and Top Accounts to Start One

Sinking funds are extremely useful to pay for large, upcoming expenses that would otherwise drain your checking account or require you to borrow.

What is a sinking fund?

A sinking fund is money you’ve set aside for a purchase or expense you know will happen. It is often used for semi-annual or annual expenses, such as vehicle maintenance, holidays or taxes.

The purpose of a sinking fund is that you’ll have saved for an upcoming expense, and it won’t ruin your monthly budget. For example, say you have to pay $1,000 for new tires. If you don’t have that cash on hand, you may have to use a credit card, which can lead to debt and high interest payments. If you had created a sinking fund where you saved $85 each month for a year, you’d have the cash in hand and wouldn’t have to use credit or pull it from your emergency fund to pay for the tires.

Is a sinking fund the same as an emergency fund?

No, and the difference is planning.

Emergency funds are savings designed to cover living expenses in — you guessed it — an emergency. They differ from sinking funds, which are designed and used for a specific upcoming expense. Emergency funds are used as a last resort, and in most cases, these funds are otherwise left alone.

Sinking fund categories and examples

Sinking funds are a practical way to manage your finances and avoid financial strain by setting aside money for a future expense. Some common sinking fund examples include:

• Birthdays and anniversaries
• Car maintenance and registration fees
• Christmas savings
• College tuition
• Debt payoff
• House down payment
• Pet expenses such as pet surgeries, vaccinations or licensing
• Property taxes
• Vacations

How do I separate my sinking funds?

The bucketing method is a great and easy way to sort your sinking funds. Bucketing is a simple budget method that separates your savings into “buckets,” each designed for a specific goal. When you get paid, you can allocate a specific dollar amount to be added to each bucket.

You can do the bucketing method with physical cash, such as separating the money into envelopes or jars. The downside of bucketing cash outside of a savings account is that it will not earn interest. If you want to earn interest on your funds, there are savings accounts with bucketing features so you can sort your savings buckets digitally.

A savings account is one of the best places to put a sinking fund. Savings accounts earn interest through an annual percentage yield (APY), which means your sinking fund will grow passively. The average interest rate for a savings account is 0.38%, according to the FDIC. Plenty of accounts have significantly higher APYs, called high-yield savings accounts.⁽¹⁾

4 top accounts for sinking funds

• Up to 3.30% APY: SoFi Checking and Savings
• Up to 4% APY: Revolut
• Up to 4% APY: Current
• Up to 3.1% APY: Ally Bank Savings Account

Up to 3.30% APY

9.2 Excellent SoFi Checking and Savings

9.2 Excellent

Daily

Up to 3.30%

Up to $250,000

$0

$0

Earn up to 4.40% APY on savings and $50 or $400 with direct deposit. Open a new SoFi Checking and Savings account by 31 December 2026, set up eligible direct deposit within 60 days, and maintain direct deposit for six months. 1.10% Boost on Savings APY to up to 4.40% for up to 6 months on new accounts. T&Cs apply.

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Why we like it Not only does SoFi® have high APYs, but it's also a great place to create sinking funds. The SoFi account is a hybrid checking and savings account with no monthly fees, overdraft fees or opening deposit requirements. The savings account can have up to 20 'Money Vaults.' These interest-bearing vaults can have their own goal so you can sort your emergency fund from your sinking funds. Your checking balance can earn 0.50% APY with no stipulations, and your savings and vaults can earn from 0.90% APY up to 3.30% APY, depending on deposit activity. SoFi also has a feature called savings round-ups, which rounds each debit card purchase to the nearest dollar and deposits the rounded-up amount into your savings. However, to earn up to 3.30% APY on savings, you must either set up direct deposit or manually deposit at least $5,000 per month. Pros & cons Pros Up to 3.30% APY on savings 0.50% APY on checking Create Money Vaults for sinking funds or savings goals No monthly fees or opening deposit requirements Savings round-ups Accepts cash deposits at Green Dot locations Cons No physical branches Deposit requirements to earn best savings APY

Up to 4% APY

9.6 Excellent Revolut

9.6 Excellent

Daily

Up to 4.00%

Up to $250,000

$0

$0

Join Revolut and get $20. Make your first virtual or physical Revolut card payment to receive $20 credited to your Revolut account. T&Cs apply.

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Why we like it Revolut's personal accounts offer high rates, and the ability to create and name goals. You can open up to 100 savings Pockets, give each one a name, pick an image, set a target and automate transfers. There's also a spare change round-up that bumps purchases to the next dollar and adds the rounded-up amount to the Pocket of your choice. Your exact savings rates vary by plan: Standard ($0/mo), Premium ($9.99/mo) and Metal ($16.99/mo). Each comes with different APYs for High-Yield Savings and regular savings, ranging from 3.25% to 4% APY, but all of those offerings are well above national averages, no matter which plan you pick. But, if you like in-person support, know that Revolut operates online only. Pros & cons Pros $0 Standard plan available High APYs across plans Create up to 100 savings pockets Savings tools and budgeting Cons Highest APY requires Metal plan ($16.99/mo) Online only

Up to 4% APY

9.2 Excellent Current

9.2 Excellent

Daily

Up to 4.00%

Up to $250,000

$0.10

$0

Get a $50 referral bonus by inviting your friends to join Current. Once the person receives the invite link and makes qualifying deposits of at least $200 within 45 days of opening the account, you and the referred friend each earn $50. T&Cs apply.

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Why we like it Current is a fintech company with bank partners. The Current account is an all-in-one bank account with checking and savings. Current is a great option for creating separate sinking funds since its savings account lets you create up to three separate 'pods' that can each earn 4% savings bonus on balances up to $2,000. The Current account has no monthly or overdraft fees, and the debit card has a points rewards program. There's also a budgeting feature to create spending categories and set up alerts for when you near the category's spending limit. On top of all that, Current offers paycheck advances, a teen bank account and credit-building with its Current Build card. However, Current doesn't support joint bank accounts, and there are no physical branches. Pros & cons Pros No monthly fees or opening deposit Up to 4% savings bonus on each pod Create savings pods for sinking funds and savings goals Credit-building card and paycheck advances for qualified users Unlock teen bank account Cons No joint accounts No physical branches

Up to 3.1% APY

9.6 Excellent Ally Bank Savings Account

9.6 Excellent

Daily

3.10%

Up to $250,000

$0

$0

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Why we like it Ally is an online bank. Its Savings Account has a high 3.1% APY with tons of savings features, including the ability to create up to 30 'buckets' to set custom savings goals or create sinking funds. Ally also offers round-ups, automatic transfers and an optional feature called Surprise Savings, which looks for extra money to transfer from your checking to savings automatically. On top of all that, Ally's checking and savings accounts have no monthly fees or opening deposit requirements. But as it's an online bank, there are no physical branches and Ally doesn't accept cash deposits. Pros & cons Pros High 3.1% APY Create up to 30 buckets for goals or sinking funds No monthly fees Round-ups, Surprise Savings and auto transfers Cons No physical branches Doesn't accept cash deposits

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Compare more savings accounts for sinking funds

Narrow down top savings account options by monthly fees, APYs and features. For a closer comparison, tick the Compare box on up to four options to see benefits side by side.

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6 of 19 results

Finder Score	Account type	Annual Percentage Yield (APY)	FDIC or NCUA insured amount	Minimum balance to earn APY	Minimum deposit to open
Promoted 9.2 Excellent Public High-Yield Cash Account	9.2 Excellent	Cash management account	3.30%	Up to $250,000	$0	$0	Go to site View details Compare product selection Compare	loading
Promoted 9.4 Excellent Wealthfront Cash Account	9.4 Excellent	Cash management account	3.55%	Up to $8M FDIC insurance	$1	$1	New clients earn can earn 4.45% APY. New clients get a boosted APY from 3.55% to 4.20% APY for 3 months on up to $150,000. Can also earn ongoing 0.25% APY increase for monthly direct deposit of $1,000 or recurring deposits of $2,500 for a total 4.45% APY with both APY boosts. T&Cs apply.	Go to site View details Compare product selection Compare	loading
Promoted 8 Great CIT Bank Platinum Savings	8 Great	Traditional savings	Up to 3.75%	Up to $250,000	$0	$100	Earn up to 4.35% APY. Get a 0.60% boost to the standard Platinum Savings APY for six months. The boost applies when an eligible customer opens a new Platinum Savings account or enrolls a qualifying Platinum Savings account using promo code BOOST60, subject to promotion terms. APYs are variable and may change. T&Cs apply.	Go to site View details Compare product selection Compare	loading
9.2 Excellent SoFi Checking and Savings	9.2 Excellent	Traditional savings,Checking	Up to 3.30%	Up to $250,000	$0	$0	Earn up to 4.40% APY on savings and $50 or $400 with direct deposit. Open a new SoFi Checking and Savings account by 31 December 2026, set up eligible direct deposit within 60 days, and maintain direct deposit for six months. 1.10% Boost on Savings APY to up to 4.40% for up to 6 months on new accounts. T&Cs apply.	Go to site View details Compare product selection Compare	loading
9.7 Excellent Live Oak Bank through Raisin	9.7 Excellent	Traditional savings	4.10%	Up to $250,000	$0.01	$0	Up to $1200 with code SUMMER26. T&Cs apply.	Continue View details Compare product selection Compare	loading
Not scored yet Robinhood Banking	Not scored yet	Cash management account	3.60%	up to $2.5 million	$0	$0	Continue View details Compare product selection Compare	loading

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How we picked these

What is the Finder Score?

The Finder Score crunches over 250 savings accounts from hundreds of financial institutions. It takes into account the product's interest rate, fees, opening deposit and features - this gives you a simple score out of 10.

To provide a Score, Finder’s banking experts analyze hundreds of savings accounts against FDIC-reported national averages as a baseline. Accounts with rates well over the national average are scored the highest, while accounts with rates well below are scored low.

Read the full breakdown

Bottom line

Sinking funds should be kept separate from your emergency fund, if possible. You don’t want to be using your emergency fund for regular expenses, vacations or regular vehicle maintenance. Sinking funds can help by not throwing your monthly budget off. Paying for things like car registration, tuition and Christmas presents out of pocket might require a credit card, which can lead to high-interest debt.

Compare more top savings accounts to securely place your sinking funds.

Frequently asked questions

Are sinking funds worth it?

Sinking funds are a great budgeting tactic and can definitely be worth your time. They are fantastic for expenses like vacations, Christmas gifts, car maintenance or high-cost obligations that would strain a monthly budget. You can integrate your sinking fund goals into your regular budget so when the time comes to use the sinking funds, it doesn’t drain your checking account, you don’t have to borrow and you can leave your emergency fund alone.

Can you have too many sinking funds?

While you can create as many sinking funds as you want, it’s possible to create too many. For example, if you want 10 different sinking funds but can only afford a $10 monthly contribution to each, the sinking funds will grow slowly and may not be large enough to cover the expenses you’re saving for. Additionally, you’ll have to manage all the various sinking funds, which can feel overwhelming.

Figure out your monthly budget to see how many sinking funds you can create. For example, if Christmas is six months away and you want to save $1,000, you’ll need to save around $167 per month. If you still have extra money to afford another sinking fund, you can create another and so on.

To make sure you get accurate and helpful information, this guide has been edited by Holly Jennings as part of our fact-checking process.

Written by

Bethany Hickey

Banking editor

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Bethany Hickey is the banking editor and personal finance expert at Finder, specializing in banking, lending, insurance, and crypto. Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance, GOBankingRates, SuperMoney, AOL and Newsweek. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt. Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others. Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine. See full bio

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