Sinking Funds
Some budgetteers call debt and savings by some funny names.
One of these that I hear from time to time is 'Sinking Funds'.
A sinking fund is (according to the Oxford English Dictionary) is:
- a fund formed by periodically setting aside money for the gradual repayment of a debt or replacement of a wasting asset.
So for example, when you purchase a fridge, once it arrives in your home you begin saving for the next fridge.
This could mean that when you go to purchase a replacement fridge, that you would have the cash to buy it with.
It is a good idea in principle, but how far does this go?
When you buy a waterproof jacket, do you begin a sinking fund for your next jacket?
When you buy the kids' school uniform, do you then begin a fund to pay for the next one? - this one makes sense.
So, I thought I'd have a bit of fun and think about if we had 'Sinking Funds', what would we use them for?
- fridge freezer. We bought a brand new fridge-freezer when we moved here. I don't have a fund to save for a new one.
- Settees. We bought two new settees approx. four years ago. I don't have a settee fund.
The only things we buy new (outside food and household items) are clothes and shoes. Man Wonderful needs a new pair of boots for the winter, and could do with a new pair of jeans for the winter too. I don't have a separate fund for his clothing and shoes.
We do have a savings account and also an emergency fund. We put money into these every fortnight.
We also have insurances.
If we needed to replace a carpet due to an accident, we could use our home insurance. Also, since Ronnie passed away on February, we have increased Millie's pet insurance.
However, there is one thing I am going to start a separate fund for, (not a sinking fund) and that is The Dentist.
I go to a private Dentist, and Man Wonderful's NHS Dentist is shortly changing to a private Dentist. It can cost hundreds of pounds to have treatment, and we both like to have healthy teeth, so I am investigating dental insurance as well and beginning a dentist fund.
Do you have different accounts or 'Sinking Funds' for things?
What about for the dentist?
FMxx
I watch several You Tube blogs about cash envelopes/cash stuffing. They have short term and long term sinking funds. One of our short term ones is dog grooming. Ten weeks ago we adopted a 19 month old ex puppy farm dog. He does not shed dog hair which is great but grooming fees are expensive. Other than that I have a savings account and 'old school' book, one account that covers savings for various things which are written down :)
ReplyDeleteOOH!! Tell me about your dog- what's he called? X
DeleteHe is called Freddie, he was given that name when he was rescued by a local lady who has rescued dozens of dogs, previously he was called Socks. He is a Lhasa Apso. He is such a lovely boy but is quite nervous and unsure of life and sadly gets very car sick. He loves family when they visit and throwing his toys and squeaky ball around.
DeleteThe term 'sinking funds' always makes me think of that last bit of the film 'Oliver' when Fagin watches all his treasures sing slowly into the murky water!
ReplyDeleteI do have different accounts.
I have long term investments which are for if I need to be 'looked after' in my old age. I have the house, I know, but belt and braces. Hopefully, I will have a useful amount to pass on to my children.
Then I have a medium term account (Premium Bonds, in fact), which are very rewarding at the moment. Wins get reinvested but when I get to the maximum, I'll move winnings sideways into . . .
Shorter term savings. This one is for anything that comes up that I can't manage to cover from my monthly income and for specific, planned and saved for projects. I don't borrow and don't have any credit cards, just a debit card. I'm lucky enough to be able to shift some of my income sideways into the short term account regularly. This would cover the dentist, white goods that need replacing, etc.
A lot of the above is thanks to an inheritance from my Mum and Dad - I know I am very, very lucky but I'm also glad that I'm not wasting the lot on riotous living < grin >. xx
I have a number of different savings accounts but I'm too old to call them 'sinking funds' lol
ReplyDelete1 for Xmas, 1 for Birthdays, 1 for Dentist/Hair, 1 for Home improvements, 1 for Holidays, 1 for Emergencies and 1 for Dog grooming - these are separate to the main savings accounts, which I tend to not touch as they have a better savings rate and it grieves me to pull any money out of them 😀 It means I never have to worry about the Grandchildrens birthdays or Christmas gifts so I find my little savings accounts a big help
Sandra