What Sinking Fund Payment Would Be Required At The End Of Each Three Month Period, At 8% Interest Compounded Quarterly, In Order To Amount To $20,000 Within Five Years?


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Meg Hayes answered
Sinking funds are considered to be quite old in the financial terms and they are used when referring to an account where money could be saved for a company on the payment of a large item e.g. Bonds or stocks.

In today's struggling economy, more and more people are looking for ways to cut their monthly spending and save money. Sinking funds can be a useful addition to your everyday or monthly budget.

With the help of a pen and paper, a calculator and the previous year's credit card and bank statements, calculating sinking funds can be quite easy to accomplish.

Below are some steps on how to easily calculate sinking funds.

• Make sure that you have gathered all your bank and credit card statements for the year just gone. You may also need statements from other accounts where money has been spent. This is because your statements will show everything that you have bought and paid for using either your debit or credit card. Your credit card statement will probably show what large or major purchases you have made that year.
• Spend some time going through all your statements and make a list of everything that is not regular or monthly. The regular spends e.g. Bills should be included into your budget for each month.
• Calculate the total cost of all the items. The amount that you get is the amount of money that you will need to have in your sinking funds account. As you will be working this out for each month, you will need to have this amount in your sinking funds account every month.
• Divide the total amount/cost that you calculate by twelve (for each month). The answer you will get is the amount of money that you will need to add to your individual monthly budget. Every month, you should deposit this into your sinking funds account every month of the year.

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