A sinking fund is an account that can be used to save for future expenses. If a business has a sinking fund, it has saved some money for later in the business cycle when major investments are needed.
If you want to create your sinking fund, here’s how to do it:
- Open up an online savings account.
To create a sinking fund account, you must open up a savings account online. You can either:
- Start a savings account online – this is probably the most common way for people to set up their sinking fund. Choose your amount of money and go through the process of opening a new bank account.
- Create a savings account with your local bank – If you have a local bank, ask them to create savings account for you. This can be an easy way to get started with your sinking fund.
- Set up the account so it cannot be accessed without your permission.
You will need to set up the online savings account you just opened so that anyone who accesses it will have to get your permission before they can access it.
- Create a PIN to protect the online savings account – This will come in handy for any transactions that are done online, as it will reduce the risk of someone accessing your savings account without your permission.
- Create a password – Password protection is also needed because you need to be able to access the account from any device or computer easily.
- Make sure the online savings account you open is FDIC-insured – Federal Deposit Insurance Corporation (FDIC) insurance protects your money if the bank you have opened your account with goes bankrupt. This way, you can ensure that your money will always be safe.
- Go through the process of linking your account to a checking or savings account – This is one of the most important parts of getting started with an online sinking fund because it allows for easy transfer of funds from one account to another. This is also sometimes called “cash management.”
- Create a beneficiary on your account – This will be the person or persons receiving the money in your sinking fund account.
- Link as many bank accounts as you want to your sinking fund – Create as many bank accounts as you want and link them all up to one thing – online savings account that cannot be accessed without your permission.
- Deposit as much money as you can – This is how you will start up your sinking fund. Get as much money as possible and deposit it into the bank account you have created for your sinking fund to start with.
- Keep track of the amount of money in your account
Always remember to make sure that you keep track of the amount of money that is in your online savings account. You will need to know how much money is in your account to start investing it properly. Stay on top of the money in your account, and then make sure you’re saving as much money as possible, or else you might start to lose money.
- Invest the money wisely
At this point, you can invest the money you have been saving for a long time into different things.
But remember, not all investments are the same. Depending on how much your sunk cost is, choose which investment is most appropriate for your sunk cost.