Sinking Fund
BudgetingGlossary term
Definition
Money set aside regularly for a planned future expense, such as a vacation, car repair, or holiday gifts. Unlike an emergency fund for unexpected costs, sinking funds are targeted savings for expenses you know are coming.
Related terms
- Emergency FundA savings buffer designed to cover 3-6 months of living expenses in case of job loss, medical emergency, or other unexpected financial setback. Essential for financial security.
- BudgetA financial plan that outlines expected income and expenses over a specific period. Creating and following a budget is essential for managing money and achieving financial goals.
- Savings RateThe percentage of income that is saved or invested rather than spent. Calculated by dividing total savings by total income. A higher savings rate accelerates progress toward financial goals and financial independence.
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