Sinking fund calculator

Split one high-yield account across several goals at once. Enter each target and its deadline, and get the required monthly for each — plus the combined total you need to set aside.

How the math works

Each goal is a sinking fund — a fixed target you fill by a fixed date. The monthly contribution is the sinking-fund payment: the deposit that, compounded at your account rate, lands exactly on the target on the deadline.

Where FV is the target, PV is anything already set aside, i is the monthly rate (annual APY divided by 12), and n is months to the deadline. At a zero rate the formula collapses to plain division: target minus what you have, divided by the months.

The part single-goal calculators leave out is the sum. Run the payment for each goal, add the payments together, and that combined figure is what actually has to clear your account every month. One account, several ledgers, one monthly number.

Worked example

Take a household running three sinking funds out of one high-yield account paying 4.00% APY: a $6,000 car-replacement fund due in 24 months, a $3,000 vacation fund due in 12 months, and a $1,200 holiday-gift fund due in 10 months.

The car fund needs $240.55 a month, the vacation fund $245.45, and the holiday fund $118.21. Added up, that's $604.21 a month into one account. Over the full run the account throws off about $299 in interest across the three goals.

Now run the same three targets at a 0% rate. The monthly climbs to $620 — the car and vacation funds each need a flat $250, the holiday fund $120. So the 4% APY covers about $16 of the monthly load. Real, but small. On short-horizon goals, the rate does a little work; the discipline of the monthly number does the rest.

When this calculator is wrong

The interest above assumes the money actually earns 4.00%. If the pooled account is a checking account or a brick-and-mortar bank's "savings" product, the real rate is closer to 0.41% — the FDIC national average. At that rate the same three goals earn about $31 over the run instead of $299, roughly a tenth. Move the pool to an account that pays the rate you're modeling. The exception is if you genuinely need branch access, in which case the convenience may be worth the spread.

Other ways the result misses:

• It treats every deadline as fixed and every target as known. That fits a car fund or a vacation. It fits a "car repair" or "medical" fund badly — those are irregular in both timing and size, and a precise monthly number for them is a planning fiction.
• It ignores inflation on the longer goals. A $6,000 car target set 24 months out may need to be more than $6,000 by the time you spend it. Short horizons absorb this; multi-year goals don't.
• It assumes one bank holds the whole pool. Deposits are FDIC-insured only to $250,000 per depositor, per bank, per ownership category. Few sinking-fund pools approach that, but a pool sitting alongside a down-payment fund at the same bank can.
• It says nothing about the interest being taxable. Interest in an ordinary savings account is taxed as ordinary income. At a 22% marginal bracket, a 4% APY is really closer to 3.1% after tax.

What to do with the result

If the combined monthly fits your budget, the practical move is to hold every sinking fund in a single high-yield account and track the split on a one-line-per-goal ledger — a spreadsheet, or the "buckets" some online banks offer. You can also do this with separate accounts per goal. At these balances the interest difference between one pooled account and five small ones is a rounding error; the real question is which setup keeps you from quietly spending the vacation fund on the car. Pick the one you'll actually keep straight.

If the combined monthly is more than you can save, don't spread the shortfall evenly. Fund the soonest deadlines first — a goal due in 10 months can't wait, while a 24-month goal has time to catch up later. The math points the same way every time: protect the nearest deadline, let the distant one absorb the gap.

Common questions

What is a sinking fund?

Money you set aside a bit at a time for a specific, expected expense — a car, a vacation, insurance premiums, holiday gifts — so the bill doesn't land on a credit card. The term comes from bond finance, where an issuer sets aside money to retire debt at maturity. Same idea, household scale.

Should I keep each sinking fund in a separate account?

You don't have to. One high-yield account with a per-goal ledger earns effectively the same interest as several small accounts and is simpler to open. Separate accounts help only if a single balance tempts you to raid one goal to cover another. The choice is about behaviour, not yield.

What's the difference between a sinking fund and an emergency fund?

A sinking fund is for expenses you can see coming and can put a date on. An emergency fund is for the ones you can't — a job loss, an urgent repair. Don't pull from the emergency fund for a known expense you could have sunk toward; that's what the sinking fund is for.

Do sinking funds earn enough interest to bother with a high-yield account?

On a short horizon the interest is modest — the three-goal example above earns about $299 over its run at 4.00%, versus roughly $31 at the 0.41% FDIC average. The gap is a factor of ten, and the account costs nothing to open, so the answer is usually yes even though the dollars are small.

How many sinking funds should I run?

As many as you have distinct, dated goals — but each one adds a monthly number you have to hit. If the combined total outruns what you can save, the calculator's total tells you before your account does, and you can drop or delay a goal on purpose rather than by accident.