Personally, the term “sinking fund” is new to me. Because of my parents, I have known the principles behind a sinking fund for a long time but the term itself is new. My parents used to set up a dedicated savings account and name it based on what they were saving up for. In most cases, they would save up for a new car over a few years so they could buy one without having to finance a car.
In a nutshell, this is what a sinking fund is but there is so much more you should know.
This post originally appeared at Wallet Squirrel.