Team Toney

Emergency Fund vs. Sinking Fund

October 11, 2017  |  8 comments

There is a difference between an emergency fund and a sinking fund.

An emergency fund is a fund set aside for unexpected emergencies. Some examples of unexpected emergencies include but are not limited to emergency room visits, loss of job or home being flooded. These are all events that occur without any prior warning. It’s good to have an emergency fund in place to take care of these expenses.  Most people choose to save around $1000 to start their emergency fund.  Imagine having that amount of money set aside versus having to use a credit card?!

Also, it is important to have a goal when building your emergency fund.  For example, if you want to save $1000 in six months, you can save $167/month for six months. Another option or way to contribute to the development of your emergency fund would be to sell items that you no longer need.

Now, sinking funds are for upcoming quarterly or yearly expenses or something that you just want to save for.  Some examples of sinking funds are car tires, property taxes, life insurance, car tag, registration fees, tuition, vacation etc.  My sinking funds are for my car tag and tires.  I predict my tires and installation to cost me approximately $400 and that my car tag will cost me $155. This is a total of $555.  In order to save this amount over the next twelve months, I need to save $46.25 that I can save each month.

I hope that this helps you to understand the difference between an emergency fund and a sinking fund.

Comments
LaTasha
Ariel, let me know if you have any questions! Thanks for reading.

Thanks Vince for the support!!!
10/22/2017 3:57:18 PM

Vincent carlisle
Eco is the way to go. And you got my Vote of course!!!!!!
10/20/2017 11:23:18 AM

Ariel
Good Information!
10/19/2017 1:41:20 PM

LaTasha
Hey Jana! I’m glad you found this to be helpful! Let me know if I can help!
10/18/2017 11:58:00 AM

Jana M.
Thanks for sharing this info. I think I will now start saving for a sinking fund.
10/13/2017 10:50:15 PM

LaTasha
Thank you all for reading. I was hoping that this would help someone.
10/12/2017 5:38:24 PM

Dianne Toney
good information
10/12/2017 9:43:09 AM

Natalie W.
Very informative!! Thanks!
10/11/2017 6:01:46 PM

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