A sinking fund spreads a large future cost into manageable regular payments. Companies use them to retire bonds; households use them for car replacement, holidays or home repairs.
How to use the Sinking Fund Calculator
- Money to accumulate
- Annual interest rate
- Compounding frequency
- Period
- Payment frequency
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the target amount, the annual interest rate and compounding, the time period and how often you will pay in.
Tips
- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.
Common mistakes to avoid
- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).
Inputs explained
| Field | What to enter |
|---|---|
| Money to accumulate | Amount in your currency |
| Annual interest rate | In % |
| Compounding frequency | Choose one: Yearly, Semi-annually, Quarterly, Monthly … |
| Period | Units: years, months |
| Payment frequency | Choose one: Monthly, Bi-weekly, Weekly, Quarterly … |
What each result means
- Number of payments = round([Period]×[Payment frequency])
- Sinking fund factor = [Rate per payment]÷((1 + [Rate per payment])^[Number of payments] – 1)
- Required contribution = [Money to accumulate]×[Sinking fund factor]
- Total contributions = [Required contribution]×[Number of payments]
- Interest earned = [Money to accumulate] – [Total contributions]
Example values
How the main result changes when Money to accumulate changes and everything else stays at the example values above:
| Money to accumulate | Required contribution |
|---|---|
| 15,000 | 226.25 |
| 22,500 | 339.37 |
| 30,000 | 452.5 |
| 37,500 | 565.62 |
| 45,000 | 678.74 |
| 60,000 | 904.99 |
Formula
Sinking fund factor = i ÷ [(1 + i)^n − 1]Payment = target × sinking fund factori = rate per payment period, n = number of paymentsWorked example
Inputs — Money to accumulate: $30,000; Annual interest rate: 4 %; Compounding frequency: Monthly; Period: 5 years; Payment frequency: Monthly.
Results — Number of payments = 60; Sinking fund factor = 0.015083; Required contribution = $452.50; Total contributions = $27,149.74; Interest earned = $2,850.26.
Frequently asked questions
What is a sinking fund?
Money set aside regularly to pay for a known future expense.
How is it different from an emergency fund?
A sinking fund is for planned costs; an emergency fund is for surprises.
Where should I keep a sinking fund?
In a high-yield savings account or CD matching the time frame.
What formula does the Sinking Fund Calculator use?
Sinking fund factor = i ÷ [(1 + i)^n − 1].