Money saving: How to save a sinking fund with envelopes | Personal Finance | Finance


Nicola, a mum-of-two, runs the award-winning financial blog The Frugal Cottage. She has explained how she uses sinking funds to help her save and manage the family budget for herself, her partner and her two children.

Nicola, who once saved a huge £17,000 in a year and plans to save £10k in 2022, told Express.co.uk: “Sinking funds are there for short term savings goals – think the next 12 to 18 months – and so you can save up for them to be spent for a specific purpose.

“For example, we have a Christmas sinking fund which I like to have saved for by October.

“This then gives me lots of time to buy Christmas presents for family and friends.

“Another one is school related expenses – with two young children there are additional costs which need to be factored in somewhere.”

READ MORE: Mum lives on £10 a week food budget – read her simple money-saving tips

Nicola has an envelope for Christmas, birthdays, school holidays, school expenses, the car and a Disneyland holiday.

She has put £80 in her Christmas envelope so far, and £20 in her birthdays fund.

She explained the birthdays fund is one that is spent and replenished often, but she said “it is useful to have if you have a lot of birthdays coming up.”

The school holidays fund, in which Nicola put £40 for the Easter holiday, is also spent and replenished often as Nicola buys treats for her children during the breaks.

She put £20 in her school fund for now, a fund which she uses for uniform, shoes and school trips.

Nicola put £20 in the car envelope and nothing in the clothes envelope, as she said no one in her family is in need to clothes currently.

The family is saving for a trip to Disneyland, in which Nicola put £20. She is anticipating it will take a few years to save for this goal, but it excited to make memories with her family there.

The saver told fans as she set up her 2022 sinking funds: “I’m such a fan of sinking funds. Sinking funds have absolutely changed my financial setting.

“I use cash envelopes. Last year they enabled me to buy a Mulberry purse.

“It also just helps us to balance our budget, especially when things are tight.

“I try to do my sinking funds entirely from side hustles, so any YouTube, Etsy or blog income. It really helps our financial circumstances.”

Nicola also uses an envelope system for her everyday budget

She calls the system “envelope stuffing” and divided her expenses into categories and envelopes.





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Divyansh Singh

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