Budgeting hacks are popular on social media right now. Among posts about cash stuffing and budget binders, you’re likely to come across sinking funds. Put simply, a sinking fund is money separate from your savings which goes towards unexpected expenses or irregular payments that are outside your normal budget. Unlike an emergency fund, it’s specifically for non-emergency expenses.
It’s definitely worthwhile budgeting for money you don’t need until you need it, if you can afford to. It can give you peace of mind knowing you won’t have to go over budget or dip into your long-term savings or emergency fund if a surprise expense comes up (as they always do).
But we think the name “sinking fund” is a little downbeat and isn’t exactly inspiring – so we’re calling it a Future You Fund instead.
A Future You Fund can go towards anything, such as a one-off payment or specific irregular payments. The purpose is personal to you and your lifestyle, so whether you choose to spend it on birthdays, dental work, car repairs or spontaneous nights out, you can.
So, how can you set up a Future You Fund using Monzo?
Create a space for your Future You Fund
You’ll need a dedicated space for your fund so it’s separate from your emergency fund (if you have one) and the other things you’re saving for.
Here’s how to create a Pot for your Future You Fund in Monzo:
Tap on your display photo in the top left corner of the Home tab
Scroll down to the Your Account section
Tap Create a Pot and choose between a Standard or a Savings Pot (an easy access account is advisable if you know you’ll need to make immediate withdrawals)
Name the Pot and add a fun custom image that will motivate you to keep adding to your fund
Put some money in now, or wait until later
You could create multiple pots for the different Future You Funds you want to build up. One for birthdays, one for car maintenance and another for vet bills, for example.
Work out how much you want to save
You’ll need to factor your Future You Fund into your budget. Pick an amount that works for you based on how much you’re already saving for other things, such as long-term goals or an emergency fund.
Be realistic. And base the amount on how much of a priority your Future You Fund is versus your other savings goals.
Contribute a set amount every week, month or pay day
Once you’ve picked the amount you want to contribute to your Future You Fund, automate your savings by setting up a standing order from your current account into your new Pot(s).
Do this in Monzo by:
Tapping the Payments icon in the menu bar
Tap Scheduled
Tap Add Scheduled Payment
Prioritise other things if you need to
Future You Funds aren’t essential, so if you’re going through a period of earning less than usual, don’t feel bad about pausing your contributions. Prioritise emergency savings, paying off debt and long-term goals if you need to.
Dip into your Future You Fund whenever you need to
If your Pot or savings account isn’t fixed, you can take money from it whenever you need to – but aim to only use it for its specific purpose. The amount in your Future You Fund(s) will be ever changing, rather than growing consistently.
Your Future You Fund is there to stop you from dipping into your emergency fund or long-term savings to cover short-term costs like days out, birthday gifts or home expenses.
If you’ve put in the time and effort to save up specifically for life’s little surprises, you’re going to be more motivated to spend the money well. Future you will be grateful.