How I Save My Money with Sink Funds

How to Use Sink Funds to Save Money

Since moving to Cleveland, we’ve had to set up some new banking routines. We opened an account with a local bank here for our personal and business needs (shout out to Huntington — they’ve been fabulously to work with*).

Opening those new accounts has come with a lot of “housekeeping” tasks, like ordering new checks and switching out all of our automatic savings sink fund deductions.

Today, I spent a good hour or two canceling all of our old monthly sink fund transfers — which were coming out of our Kansas account — and re-establishing them to come out of our new account. As I did this, I thought, gosh, this is kind of time-consuming… but it’s also so worth it, because I JUST LOVE OUR SINK FUNDS.

Sink funds — also known as sinking funds — have definitely been one of the keys for us getting and keeping our finances on track. I know a lot of you already use sink funds — or are working toward “getting ahead” so that you can start using them — but for those who are new to the concept, I wanted to take this opportunity to remind you guys about my love for this great personal finance tool!

You can read a full blown, detail-by-detail accounting of what, why and how to set up your sink funds in this post on How Using Sink Funds Will Break the Month-to-Month Cycle.

What’s the point of sink funds?

With sink funds, you no longer get caught off-guard by that annual insurance bill or the roof repair bill — because you already have money set aside to cover it. Instead of scrambling to cover your bills retroactively, you just set aside money every month to proactively take care of them.

With sink funds, you are saving today for tomorrow, rather than stressing tomorrow about how to pay for yesterday. 

What expenses can you save for in a sink fund?

Typically, sink funds are used for annual (or semi-annual) expenses — like insurance bills — as well as for predictable, but undefined expenses — such as car repairs or home maintenance.

But really, you can “sink” for any kind of future expense — large or small. If your annual home owners insurance bill is $1200, squirrel away $100 a month. If it costs you $75 a year to renew your license, start putting $6.25 a month into a sink fund. Want to get your husband a $400 watch for his big 40th birthday in eight months? Just save $50 a month until the big day – and you’ll be all set to pay cash for that gift. And if  your kids’ summer camp costs $3000, then stash $250 a month in a sink fund.

How many sinks funds do you need?

You can have as many or as few sink funds as makes sense for your personal finances. We typically have 8-12 sink funds going at any given time, depending on what’s happening in our life.

As our life changes, our sink funds change. If we close out a sink fund because we no longer have that expense (like when we moved from an area with an Home Owner’s Association fee to one without it), we just transfer the balance of funds into another long-term savings account. (Yay, for a bonus $40 into our vacation savings fund!)

Where should you save your sink funds?

You can save your sink funds anywhere, but I strongly, strongly recommend keeping them in a bank account that’s separate from your day-to-day checking account. When it’s a little inconvenient to get at the funds, you’re far more likely to just leave them alone until you need them for their intended purpose.

Long-time readers of KOAB know that we have kept our sink funds at Capital One (formerly: ING) for years. There are many reasons I love this bank (you can read some of them HERE, HERE and HERE), but as fas as our sink funds go, I really appreciate that Capital One lets us have as many “sub-accounts” as we want.

If I want to have 5, 15 or 50 different sink funds, I can – without any fees or hoops to jump through. I just log in with my one account number, and then set up a new sub-account, naming it whatever I want (my accounts are creatively named things like “Camp Sink Fund”, “Car Insurance Sink Fund” and “Family Gift Sink Fund”).

For those who have been thinking about signing up for a Capital One online account, please know that if the past is any predictor, there will be a big incentive to start a new account around Black Friday. Last year, for example they offered a $75 bonus for new savings accounts.  So, hang tight – Black Friday is right around the corner

Do you use sink funds? Have they changed your personal finances? What kinds of expenses do you “sink”?

* I’m mentioning the name of our bank because they have been so wonderful for us. The folks at Huntington have no idea that I blog and certainly didn’t ask or expect me to give them a shout out.


  1. Interesting. We have always just kept one savings account which is at a Credit Union and not where we have our checking account. I am not trying to be argumentative here, I am just truly wondering why the need to have so many (or any really) subaccounts? One could apply the same principles you use above of dividing an expense into 12 mo. payments and just sending it to the savings account and then pulling it from there when the funds are needed. In addition,our credit union pays out dividends in different levels determined by how much money is in the account. We earn more by keeping one large account vs several very small accounts. We also try to time our withdrawals to periods after the dividends are paid out as every little bit counts. So, I am wondering, really, what are the benefits of multiple accounts?

    • Mara Strom says

      Hi KelliiinKc — Thanks for your question. The reason I have sub-accounts is so that I really have a good sense of what that money is intended for. If I put it all into one account, I worry that I’d be tempted to use it for other purposes. I like seeing $120 in my car registration fund and $1000 in my insurance fund. I’m a visual person and this helps me to stay diligent. Others might be more disciplined/organized and able to lump it all together. Some have one “pot” of money, and use Excel to divide out their individual funds with that pot. Also, just so you know, I don’t have multiple accounts — I have one account, which serves as an umbrella. Under that umbrella, I have several different “sub-accounts” — basically labels with totals that show how much I have in each category.

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