As you scroll through your Instagram, you can’t even go for 2 minutes without seeing somebody posting themselves splurging cash at their kids’, spouse’s, or friend’s birthday, and you start wondering, “Where do these guys get so much money to just throw around in this economy?”
Well, I did a little bit of research and discovered that these people are just like you and me, only that they have one secret tool they leverage in order to throw money around during special occasions: a sinking fund.
What’s a sinking fund?
A sinking fund is simply a goal-based saving platform. It is where you save some amount of cash monthly to accumulate it for a specific occasion, like Christmas Day, your birthday, your partner’s birthday, a December holiday trip, a treat day, or whatever you may have in mind. Sinking funds enable you to spend guilt-free during special occasions without touching your salary.
Types of Sinking Funds
You can have as many as you want, but here are some practical ideas:
Lifestyle sinking fund: Save money to occasionally buy something nice for yourself, for example, a new watch, a new piece of furniture, a perfume you’ve been wanting for so long, etc. It could be anything that is part of your lifestyle, even your treat days at a spa.
Christmas sinking fund: If in January 2025, you opened a Christmas sinking fund and decided you’ll be putting 2,000 every month, come December, you’ll have a whopping 24,000 to spend without touching your salary.
Birthday sinking fund: Save for your next birthday months before it arrives.
Insurance sinking fund: If you are self-employed, you can put money aside every month to accumulate for a premium you pay once a year, whether it’s your health or car insurance, to avoid panicking when that day comes.
Holiday sinking fund: Save for next year’s holiday the previous year.
Investment sinking fund: Save money in case an investment opportunity shows up in the future. You don’t withdraw to spend but to reinvest in better platforms with higher returns. It’s a great wealth-building tool.
You can have as many as you want and save for months before it arrives.
The best platform for these funds is a money market fund as your money earns good interest while you save up to achieve your goals.
Why MMF is the best platform for a sinking fund
Less impulsive withdrawals: As compared to Mshwari, you cannot withdraw impulsively as the money takes 2-3 working days for a withdrawal to be processed. It helps you rethink your decision of choosing to withdraw before the day you saved up for arrives.
Higher interest rates: Jubilee Money Market Fund offers 15% interest p.a compounded daily. You achieve your savings goals faster. Normal bank accounts only give you 3% simple interest.
Goal separation: At Jubilee, you can decide that one sinking fund will be in a money market fund and another in a fixed deposit account, thereby enabling you to separate your sinking funds. Separating them will help you track where you are in each goal you want to achieve.
Remember, sinking funds enable you to invest your money for a reason that will bring you joy in the future. Isn’t that the whole purpose of money spending it for joy and fulfillment?
Smart spenders withdraw from their sinking funds guilt-free.
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