What is a Sinking Fund?

"Sinking fund" is a term you may not have heard before, but it's a good way to include predictable expenses in your budget. If you know that you'll need to make a large purchase or pay a big bill sometime in the future, you can put aside money leading up to it, so when it's time, you can just take that money out of your savings account and pay it. Here are some times when it pays to create sinking funds, as well as tips to manage that cash so it's ready when you need it.