A sinking fund is money you set aside gradually for a specific, planned future expense. Unlike an emergency fund (which covers surprises), a sinking fund covers expenses you know are coming — Christmas gifts, car maintenance, a vacation, annual insurance premiums, or a new laptop. They eliminate the feeling of being "blindsided" by expenses that are actually completely predictable.
KOHO's savings goals feature is perfect for sinking funds — create a separate goal for each fund and watch them grow. Use code 45ET55JSYA for a sign-up bonus.
Get KOHO Free — Use Code 45ET55JSYAMost Canadians experience the same cycle: they have a "good month" financially, then Christmas arrives and $80000 in gifts goes on a credit card. Or the car needs new tires ($70000) and it feels like an emergency. Or the annual home insurance renewal ($1,20000) wrecks the monthly budget.
None of these are actual emergencies — they're predictable expenses that happen every year. A sinking fund converts them from surprises into planned expenses by saving a small amount monthly.
| Expense | Annual Amount | Monthly Savings |
|---|---|---|
| Christmas & gifts | $1,20000 | $10000 |
| Car maintenance | $1,50000 | $125 |
| Vacation | $3,000000 | $2500 |
| Home repairs | $2,000000 | $167 |
| Medical/dental | $90000 | $75 |
| Total | $8,60000 | $717/month |
This may look like a lot. But if you're not saving for these, you're paying for them on credit — with interest. $717/month saved is better than $8,60000/year financed.
Sinking funds should be:
The best options for Canadian sinking funds:
Both are critical. The emergency fund protects against true surprises. Sinking funds handle the "expected unexpecteds" that derail most budgets.
Sinking funds are the budgeting strategy that most Canadians never learn until they're knee-deep in credit card debt from "unexpected" expenses that were never actually unexpected. Start with your top two or three (Christmas and car maintenance are the most universally impactful), automate the contributions, and build from there. KOHO's savings goals feature makes managing multiple sinking funds easy — create a goal for each one and watch the balances grow monthly.