Sinking Fund Calculator
Work out the fixed periodic deposit needed to reach a savings target by a set date, with the total you contribute and the interest it earns.
How it works
Deposit PMT = FV × i ÷ ((1 + i)^n − 1), where i = rate per period and n = number of periods · If i = 0, PMT = FV ÷ n
A sinking fund sets aside a fixed deposit every period so a known future cost — a roof, a vehicle, a bond repayment — is fully funded when it comes due. This is the future-value-of-an-annuity formula solved for the payment: because each deposit earns interest until the target date, you need to contribute less than the goal itself. The earlier deposits do the most work, since they compound the longest, so a higher rate or a longer runway shrinks the required payment.
Worked example
To accumulate $10,000 in 5 years at 6% compounded monthly, i = 0.06 ÷ 12 = 0.005 and n = 60. PMT = 10,000 × 0.005 ÷ (1.005^60 − 1) = 50 ÷ 0.34885 ≈ $143.33 a month. Over 60 months you contribute about $8,600, and interest supplies the remaining $1,400.
Frequently asked questions
What is a sinking fund?
It is money set aside gradually to pay for a specific known expense or debt in the future. Companies use them to retire bonds; households use them for predictable big-ticket costs so the bill does not arrive as a shock.
Why is the deposit less than the target divided by the number of periods?
Because the balance earns interest along the way. The compounding does part of the saving for you, so the required deposits total less than the goal. At a 0% rate the deposit is simply the target split evenly across the periods.
Does it assume deposits at the end of each period?
Yes — this uses an ordinary annuity, with each deposit made at the end of the period. Depositing at the start of each period would require slightly less, since every dollar gets one extra period to grow.
Related calculators
Educational estimate, not investment, tax or financial advice. Returns are never guaranteed and past performance does not predict the future. Confirm figures with a licensed advisor.