Calculate the regular contributions needed to accumulate a target sum in a sinking fund at a given interest rate.
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Savings Planning
A sinking fund is a savings plan where you make regular contributions to accumulate a specific target amount by a future date. This calculator tells you how much to contribute each period given an expected interest rate.
Originally a corporate finance term for setting aside money to retire debt, a sinking fund in personal finance means any systematic savings plan toward a defined goal — a house deposit, a car replacement fund, or a major purchase.
The advantage of planning with a sinking fund formula is that compound interest reduces the total amount you need to contribute out of pocket.
The sinking fund payment is the inverse of the future value of an annuity.
Payment = FV × r / ((1+r)ⁿ − 1)
FV = target amount, r = periodic interest rate, n = total number of periods.
Target 100,000, 5% annual rate, 10 years, monthly contributions. Monthly rate = 5%/12 = 0.4167%. Periods = 120. Payment ≈ 643.47/month. Total contributed ≈ 77,216 with ≈ 22,784 in interest earned.
Assumes a fixed interest rate throughout the savings period. Real savings rates fluctuate. Does not account for taxes on interest income or inflation eroding the target’s purchasing power.
Frequently asked questions
No. An emergency fund is for unexpected expenses and should be liquid and readily accessible. A sinking fund is for a planned, specific future expense with a known target amount and timeline.
Use the rate offered by your savings vehicle. For high-yield savings accounts, this might be 4–5%. For certificates of deposit (CDs), check current offered rates. For investment accounts, use a conservative expected return.
More frequent contributions (monthly) result in slightly lower total contributions due to more frequent compounding. Monthly is also easier to budget around regular income.
Missing a contribution means you’ll fall short of the target unless you increase subsequent payments. Recalculate with the remaining balance, periods, and target to find the adjusted payment.
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