A sinking fund is a savings account with a job description: a named expense, a deadline, and a monthly deposit sized to arrive on time. It is the difference between replacing the car you know is dying and financing the replacement on a 21 percent credit card. This calculator inflates the future price of the goal, solves for the exact monthly deposit a high-yield balance requires, shows the interest your deposits earn along the way, and prices the alternative, putting the same bill on plastic and paying it off after the fact.
Most people treat predictable expenses as surprises. The insurance premium arrives every twelve months, the holidays arrive every December, the ten-year-old car announces its intentions for months in advance, and each arrival gets financed at credit card rates as though nobody could have seen it coming. A sinking fund reverses the sequence: you name the expense, estimate its cost, count the months, and bank a fixed deposit every month until the date arrives. The money earns interest on the way instead of costing interest after the fact.
The arithmetic has two parts people get wrong. First, the target moves: a $15,000 goal two years away is a $15,913.50 target if prices rise 3 percent annually, so the plan has to chase the future price. Second, the interest works but only at the margin: deposits do the heavy lifting, and a 4 percent yield on a balance that starts small trims the deposit by $28.08 a month at these defaults rather than halving it. This page solves for the exact deposit, shows the balance month by month, and then runs the comparison that justifies the whole exercise: the same $15,913.50 charged to a 21% APR credit card and paid back over the same 24 months costs $3,711.91 in interest. Saving first versus borrowing later swings the total cost of the identical expense by $4,385.74.
Variables in plain terms. The goal is the expense in today's dollars, $15,000 at the defaults. Inflation grows it to the future price FV; set it to 0 for goals with a contractually fixed cost. The existing savings S is $2,000 here, and it compounds for the full term before the deposits start doing the work, which is why every dollar already banked reduces the monthly deposit by more than its face value spread over the months. The monthly rate i converts the bank's APY into a monthly growth factor, 0.3274 percent at 4.00% APY. The deposit formula is the standard future-value annuity rearrangement: it finds the payment whose compounded stream, added to the grown seed money, lands exactly on FV in month n. When the APY is zero the formula collapses to simple division of the gap by the months.
A $15,000 used car, two years away, prices rising 3 percent a year. The target inflates to $15,913.50. The $2,000 already saved grows to $2,163.20 on its own, leaving $13,750.30 for deposits to cover. At 4.00% APY the required deposit is $551.65 a month, $13,239.68 of contributions in total, and the interest earned on the growing balance is $673.82. The cash-jar alternative, the same goal with no interest, demands $579.73 a month, so the high-yield account is effectively paying $28.08 of every month's deposit.
| Plan at the defaults | Amount |
|---|---|
| Goal in today's dollars | $15,000.00 |
| Inflated target in 24 months (3%/yr) | $15,913.50 |
| Seed money grown at 4.00% APY | $2,163.20 |
| Required monthly deposit | $551.65 |
| Total contributions over 24 months | $13,239.68 |
| Interest earned along the way | +$673.82 |
| Cash-jar deposit with no interest | $579.73 |
| Monthly savings from using a 4.00% account | $28.08 |
Deposits dominate early, interest takes over late. At month 12 the fund holds $8,820.34, just over half the target, and interest has contributed only a fraction of the growth. By month 24 the balance crosses $15,913.50 exactly on schedule. This shape is worth internalizing because it explains why sinking funds feel slow for the first year and then accelerate: the interest is a rebate that compounds on the deposits you already made, never a substitute for them.
| Month | Balance | Month | Balance |
|---|---|---|---|
| 3 | $3,680.09 | 15 | $10,567.64 |
| 6 | $5,376.74 | 18 | $12,332.15 |
| 9 | $7,090.10 | 21 | $14,114.05 |
| 12 | $8,820.34 | 24 | $15,913.50 |
The comparison that makes the sinking fund worth the discipline. Suppose the plan never happens and the $15,913.50 car gets financed on a 21% APR credit card at purchase time, then paid off over the same 24 months. The card payment is $817.73, total outlay $19,625.41, interest cost $3,711.91. Run the same expense through the fund instead and the total outlay is $15,913.50, of which $673.82 was paid by the bank rather than by you. The identical expense, two years apart in method, differs by $4,385.74, roughly the price of the fund's entire interest earnings plus two full months of deposits. At the FDIC national average savings rate of 0.38 percent the fund's interest shrinks to about $64, which is a useful reminder that the account choice matters almost as much as the plan: the deposit schedule costs nothing to move to a 4 percent account, and the $600-plus difference is pure yield.
| Path to the same $15,913.50 car | Monthly | Total outlay | Interest |
|---|---|---|---|
| Sinking fund, 4.00% APY | $551.65 | $15,913.50 | −$673.82 earned |
| Cash jar, 0% interest | $579.73 | $15,913.50 | $0 |
| Credit card at 21% APR, paid over 24 months | $817.73 | $19,625.41 | $3,711.91 |
Two sensitivity checks round out the picture. Starting from zero instead of $2,000 raises the deposit to $638.44, so the seed money is worth $86.79 a month, more than its $83 face value spread evenly, because it compounds for the full two years. Stretching the deadline from 24 to 36 months drops the deposit from $551.65 to $370.76 while the inflated target rises to $16,390.90, and compressing it to 12 months nearly doubles the demand to $1,094.25. Time is the cheapest input in the whole plan, which is why the right moment to open a sinking fund is always the moment you first can name the expense. For goals that share the same mechanics with a longer horizon, the savings goal calculator handles the general case, and the emergency fund calculator sizes the fund for the expenses nobody can schedule.
A sinking fund pays for an expense you can see coming; an emergency fund pays for the ones you cannot. The car you will replace in three years, the annual insurance premium, the December holidays: these are predictable, so they get a named fund with a deadline and a monthly number. The transmission failure is not predictable, so it draws from emergency reserves. The practical test is whether you can name the event and estimate its cost today. If yes, it belongs in a sinking fund, where the monthly deposit in this calculator tells you exactly what it takes. Keeping both separate matters because every dollar of predictable spending that gets charged to the emergency fund makes the true emergencies cheaper to feel unprepared for.
Because prices do not wait. A $15,000 used car two years from now is a $15,913.50 car if vehicle prices rise 3 percent a year, so the fund has to reach the future price, not today's. The calculator inflates the goal by your assumed rate before computing the deposit. Skipping this step is the most common way sinking funds come up short: the saver dutifully banks the deposit computed from today's price and discovers at purchase time that the goalposts moved. The inflation input also lets you set the rate to zero when the goal genuinely does not move, such as a fixed-rate loan payoff or a quoted wedding package locked by contract.
In a high-yield savings account or a certificate of deposit that matures before the deadline, never in stocks. The horizon is short and the date is fixed, so volatility is the wrong risk: a 20 percent market drop in month 20 of a 24-month plan is a real loss with no time to recover. The trade-off is yield. The FDIC national average rate for savings accounts was just 0.38 percent in its August 2026 rate table, while top online accounts pay around 4 percent APY, so the account choice alone moves the interest earned on this page's defaults from roughly $70 to $674. Match the vehicle to the deadline: fully liquid savings for anything under a year, a CD ladder for fixed dates one to three years out.
The calculator does that arithmetic for you. At the defaults, the $15,913.50 target needs $579.73 a month from a no-interest cash jar but only $551.65 a month once a 4 percent APY works on your balance, a $28.08 monthly difference that compounds to $673.82 of interest over the two years. The catch is that interest does most of its work late: the balance is small in the early months, so interest is not a substitute for deposits, it is a rebate on them. Treat the interest as a bonus rather than planning around it, and if rates fall, only the bonus shrinks, never the plan.
Nothing structural breaks, the math just reprices. A missed deposit means the remaining months must carry the shortfall plus the interest it would have earned, so the new required deposit rises slightly. The cleanest repair is to spread the catch-up over the remaining months rather than doubling the next payment. If the revised number is unaffordable, you have two honest options: push the purchase date back, or shrink the goal. What to avoid is quietly abandoning the fund, because the expense arrives on schedule whether or not the savings did, and the fallback is usually a credit card at 20-plus percent, which is precisely the outcome the sinking fund exists to prevent.
Enough to cover your named, recurring expenses, typically three to seven categories for most households: vehicle replacement and repair, annual insurance premiums, holidays and gifts, home maintenance, medical costs above what insurance covers, travel. More than that and the tracking overhead starts to exceed the benefit. They can share a single bank account as long as you track the sub-balances, one line per fund, or many banks let you open multiple savings accounts nicknamed per goal. The structure that matters is the discipline, not the accounting: every predictable expense gets a name, a deadline, and a monthly number, so that no predictable expense ever justifies new debt.
Same compounding math, different starting question.