Sinking Fund Calculator
How much to set aside each month for a known future cost — a car replacement, a roof, school fees — so it never becomes debt.
A sinking fund is the opposite of a loan: you save before rather than borrow after.
How the sinking fund calculator works
A sinking fund is the opposite of a loan: you save before rather than borrow after. The monthly amount is the target divided by the months available, reduced by whatever interest the balance earns.
Its value is not the interest — it is that a known expense never becomes a surprise. Most consumer debt is expenses that were entirely predictable but not planned for.
Formula: PMT = (FV − PV(1+i)ⁿ) × i / ((1+i)ⁿ − 1)
Worked examples
| Inputs | Save each month | Note |
|---|---|---|
| 12,000 in three years | £284.76 | about 288 a month |
| No interest | £305.56 | a straight division |
| Shorter horizon | £896.65 | far more per month |
FAQFrequently asked questions
What is a sinking fund?
Money set aside gradually for a known future expense, so it is paid for when it arrives rather than borrowed for.
How is it different from an emergency fund?
An emergency fund covers the unexpected; a sinking fund covers the expected. Car replacement, a roof and school fees are all predictable.
Does the interest matter?
Only a little over short horizons. The point is planning, not return — this page shows both so you can see the difference.
How many should I have?
One per irregular expense you can foresee. Many people run several small ones rather than a single pot, because it makes the purpose visible.
Why not just borrow when the time comes?
Because the interest runs the other way. The comparison row shows what the same amount borrowed at 12% would cost.
Where these figures come from
- CFA Institute — Quantitative Methods: The Time Value of Money — the discounting, annuity and IRR conventions used here
- US Federal Reserve — Regulation Z (Truth in Lending), APR calculation — why APR includes fees where a nominal rate does not
- MoneyHelper (UK Government-backed) — the UK's free money guidance service
Last checked: September 2026. These are the standard textbook formulas; the conventions named are those of the CFA Institute curriculum and ISO 80000 usage.