Sinking fund
A sinking fund is money you set aside bit by bit for a large expense you know is coming, like a car, a certification or a down payment, so it doesn't land on a credit card.
🌍 In the real world
Divide the cost by the months until you need it, and save that much each month. Unlike an emergency fund, a sinking fund is for costs you can see coming.
The name comes from government and company finance, where a sinking fund is money set aside over time to pay off a bond when it comes due. Money needed within a few years usually stays in cash or other low-risk savings, because stocks can be down just when the bill arrives.
Formula
Monthly saving = cost ÷ months until you need it
Example
A $3,000 car repair expected in 10 months needs $300 a month.
🎮 In Journey Shares
City purchases, like gear, cars and homes, are the game's big planned expenses. Setting cash aside for them before you buy keeps you from selling shares in a hurry or borrowing on margin. →
🧭 How to use it
Before a big purchase in the city, move the cash aside first. If buying it would leave you short for this week's tax or dip into your savings, wait.
🎮 Learn Sinking fund the fun way
Try it in a live 3D city with play money: trade shares in real public figures, get margin-called, pay your taxes and rob a bot or two. Free, and nothing real is at stake.
❓ Common questions
How is a sinking fund different from an emergency fund?
An emergency fund is for surprises. A sinking fund is for costs you can see coming, like a car, a wedding or a holiday.
Where should a sinking fund be kept?
Money you need within a few years is usually kept in savings or other low-risk accounts, because stocks can be down just when you need to spend.
📜 Where it came from
🧩 Quick check
Which term is this?
“A ____ is a plan for your money: what comes in, what has to go out, and what's left to save or spend. It's the first step because every other money decision depends on knowing those numbers.”
🔗 Related terms
- Budget: A budget is a plan for your money: what comes in, what has to go out, and what's left to save or spend.
- Emergency fund: An emergency fund is cash set aside for surprises, like a job loss, a car repair or a medical bill, so you don't have to borrow or sell investments at a bad time.
- Bond: A bond is a loan to a government or company that pays the lender interest (the coupon) and returns the full amount (the face value) at a set date.
- Opportunity cost: Opportunity cost is the value of the best alternative you give up when you make a choice.
Categories: Personal finance
Practise with $10,000 in play money
Free. No real money involved.