What Is A Sinking Fund And Why You Need One

Photographed by Anna Jay

When it comes to budgeting, a whole dictionary's worth of terms get thrown around. It can be hard – especially when you're new to personal finance – to make head or tail of it.

What are the ideas that don't really make any sense? And which concepts are genuinely worth investing in (no pun intended)?

A sinking fund is definitely one of the latter. Like an emergency or layoff fund before it, a sinking fund is a way to mentally and literally apportion your money so as to better protect you and your peace of mind.

But what is it exactly? We spoke to Kia Commodore, personal finance guru and founder of the Pennies To Pounds platform, to get all the details you need.