Sinking Funds UK 2026
A sinking fund converts large irregular annual bills into small monthly savings. Car insurance, Christmas, holidays and home maintenance arrive predictably every year — yet they catch most people off-guard because they only arrive once or twice a year.
Most Common Sinking Fund Categories
| Category | Typical Annual Cost | Monthly Saving |
|---|---|---|
| Car insurance | £600–£900 | £50–£75 |
| Home insurance | £200–£400 | £17–£33 |
| Car MOT and service | £300–£500 | £25–£42 |
| Christmas gifts | £300–£600 | £25–£50 |
| Holiday | £1,000–£3,000 | £83–£250 |
| Home maintenance | £500–£2,000 | £42–£167 |
How to Set Them Up
- List every large irregular expense from last year
- Estimate the cost and typical month it falls
- Divide annual cost by 12 for the monthly saving amount
- Open a separate pot or savings account for each fund
Where to Keep Sinking Funds
Use Monzo or Starling named pots — they are free, earn interest, and keep funds visually separate without opening multiple accounts. Alternatively, Chase or Atom Bank easy-access accounts pay 5%+ on these balances.
How Many Should You Have?
Start with three or four for the most impactful expenses — typically car costs, holiday and Christmas. Add more categories as the habit becomes established.
Fund sinking funds on payday before variable spending.