What Is the Difference Between a Sinking Fund and an Emergency Fund?
What Is the Difference Between a Sinking Fund and an Emergency Fund?Answer: When you set up a sinking fund, you are basically saving up money to cover an upcoming expense. You may do this to purchase a new car, go on vacation, replace your furnace or repair your roof. An emergency fund is in place to cover the unexpected expenses that can happen. This could be an unexpected car repair, an unexpected medical bill or an emergency flight home to your parents. You can set the funds up so that they exist in the same savings account, but it is a good idea to keep the amounts separate. You can do this on a sheet of notebook paper or in your budgeting software. This allows you to see how much you have set aside for each category, but it also keeps the money separate from your checking account and your daily transactions. You do want your emergency fund to be easily accessible, so that you can get the money quickly if you need to. The longer you budget, the more you will see items that you shou
