While many people make New Year’s resolutions about exercising more and eating better, they often ignore their financial health. You’ve probably heard of emergency funds, and they’re still something we recommend. One of your financial goals for 2026 should be to set up multiple sinking funds. They’re a smart way to avoid debt and manage your money. Let’s take a look at what sinking funds are and some budget categories that often go overlooked.
What Is a Sinking Fund, and Why do They Work?
A sinking fund is money set aside for a specific future expense. It’s typically held in a dedicated savings account that you contribute to over time. It’s not the same as an emergency fund, which is two to three months’ worth of living expenses set aside for unexpected expenses. Sinking funds are used to cover predictable or recurring costs. Budgeting with sinking funds can reduce stress, prevent budget surprises, and limit your credit card use (and the interest costs if you can’t pay off your balance at the end of the month).
10 Overlooked Sinking Funds to Start in 2026
You can set up whatever sinking funds you need to help you plan and save for the future. Here are 10 potential funds to consider:
Pet Emergencies and Vet Bills
While most pet owners view their critters as members of the family, the cost of caring for your Fido or Fluffy is getting more expensive and can put many owners in a bind. Costs include grooming, dental care, prescriptions, health checkups, and unexpected visits from illnesses, injuries, and dealing with something they swallowed.
A recent study by the American Animal Hospital Association revealed that nearly half of pet owners say unexpected pet expenses caused them financial concern in 2025, an increase from one-third of pet owners in 2022. At the same time, the lifetime cost of caring for a dog increased by more than 11% over 2022, while the lifetime cost of caring for a cat increased by more than 19%.
Amid these rising costs, the study revealed that most owners vastly underestimate the cost of caring for their pet. The 15-year cost of caring for a dog is more than $60,000, and the cost of caring for a cat is more than $47,000. By having a sinking fund to cover your pet care costs, you can be better prepared to take care of your furry friend.
Car Registration, Inspections, and Maintenance
The average maintenance cost for a vehicle is $900 per year, according to ConsumerAffairs.com. This includes the cost of tires, oil changes, air filters, license renewals, and surprise repairs. Of course, the cost of servicing your ride also depends on the type of vehicle you drive and its age. Consumer Reports ranks the cost of servicing many types of vehicles, ranked by brand, to give you a better idea of what to expect.
Holiday Travel and Gifts (Beyond December)
Many people’s budgets (and waistlines) are under a great deal of stress from Thanksgiving to New Year’s from travel, parties, and gifts. Of course, there are many other festivities throughout the year such as birthdays, anniversaries, graduations, weddings, retirement parties, and so on. Take a look at how much you spent on these events in the past and how many you expect you’ll have in the coming year to get an idea of how much you should set aside.
Back-to-School Expenses
The cost of starting a new school year involves school supplies, clothing, technology upgrades (such as a new computer), and school fees.
A survey this past summer by the National Retail Federation revealed that families with students from elementary through high school planned to spend an average of $858 on clothing, shoes, school supplies, and electronics. This breaks down to:
- Electronics: $296.
- Clothing and accessories: $249.
- Shoes: $169.
- School supplies: $145.
For college students, the average cost was $1,326. The top average spending by category was:
- Electronics: $310.
- Apartment or dorm furnishings: $191.
- Clothing and accessories: $166.
- Food: $140.
- Personal care items: $118.
Medical Deductibles and Copays
No matter what kind of healthcare coverage you have, there are going to be deductibles and co-pays. Those with employer-provided health insurance spent an average of $3,564 per family last year, according to a survey by Peterson-KFF. The average per family premium contribution, including deductibles, co-pays, and employee contributions, was $6,296. Healthcare costs are rising faster than inflation, so setting something aside for your medical expenses makes sense.
Home Maintenance and Appliance Replacements
For most Americans, their home is their most valuable asset, so it’s something you need to maintain. Not just for your own health and comfort, but as a way of reducing your need for expensive repairs and replacement. Your cost of home maintenance, replacement, and repairs may involve your washer and dryer, dishwasher, water heater, roof repairs, plumbing, and so on.
A survey by U.S. News & World Report over the summer revealed that 55% of American homeowners experienced a major unexpected repair that significantly impacted their budget over the past year. The same number said worrying about unexpected home repairs significantly increased their stress levels.
Financial and home repair experts recommend budgeting from 1% to 4% of a home’s value each year for maintenance and repairs. For a home with a value of $500,000, that would mean a home maintenance budget of $5,000 to $20,000. Of course, this depends on the age of your home, your roof, and your appliances.
According to This Old House, the cost of replacing a roof on a 1,800 square-foot home ranges from $7,071 to $23,417 with an average cost of $9,199. You can get an estimate on the cost of replacing a roof at This Old House’s website.
Subscriptions and Annual Renewals
The cost of technology and entertainment alone can add up to a significant expense over time. Things like streaming services, antivirus software, and cloud storage might not seem very expensive on a monthly basis, but their costs are on the rise and can certainly add up over time. Take a close look at how much you’re spending on these kinds of regular expenses, consider where you might cut back to save money, and budget for them with a sinking fund.
Self-Care and Wellness
The cost of self-care and wellness depends on your situation. This budget item includes haircuts, dental cleanings, and gym memberships. It may also include therapy sessions. Many people sign up for a gym membership based on a New Year’s resolution, but their interest quickly fades. Having something set aside for your own self-care can help reduce the impact it can have on your budget.
Giving and Donations
Between Giving Tuesday, year-end tax planning, and fundraisers, many Americans are in a giving mood this time of year. By setting aside money for year-end giving, you can plan to meet your regular obligations and any unexpected ones that may arise.
Technology Upgrades and Repairs
Phones, laptops, tablets, and accessories all need maintenance or replacement at times. This includes the cost of the hardware itself, but also software. Deloitte’s 2025 Connected Consumer Survey revealed that American households spent an average of $896 on connected devices in 2025, compared to $764 and 2024. Additionally, 29% of respondents said they would increase their spending on devices in the coming year, while 24% said they would cut back on technology spending. Consider how old your devices are and when you might need to repair or replace them so you can plan and set money aside.
How to Start Your New Sinking Funds
When considering how to set up sinking funds, we recommend starting with a couple of important categories. You might look at your budget and past expenses to get an idea of how much you need to set aside for each fund. Once you have good estimates of your annual costs, divide that figure by 12 to set your monthly savings goals for each fund.
You might create separate savings accounts and label each of them or put them all in one account and use budgeting apps to keep track of how much is allocated for each fund. Consider setting up automatic transfers into your sinking funds, either by splitting each paycheck or by making regular transfers from your checking account to your savings accounts.
Bonus Tip: Use Your Bank’s Tools to Stay Organized
Consider naming your sinking funds accounts so you know what each of them is for. Additionally, online and mobile banking make it easy to track your progress and manage your accounts.
Start 2026 with a Smarter Savings Plan
Open a savings account ABC Bank Personal Savings Accounts in TX & CO that can help you plan for real-life expenses and avoid credit card charges or taking on debt. Contact us or visit one of our many locations to talk about setting up sinking funds to help you reach your goals.
