Sinking Fund

A sinking fund is a disciplined way to set aside a fixed amount of money at regular intervals so that a large future debt or liability can be paid off in one go. Instead of scrambling for a lump sum at the end, you systematically build it up, with each deposit earning compound interest along the way. The core idea is that a series of smaller, manageable payments today can grow into exactly the amount you need tomorrow. This makes sinking funds a practical tool for planning major expenses like repaying a bond or replacing expensive equipment. …