What did people do before credit cards? They actually saved for big expenses! This is what is called a Sinking Fund. We sink a certain amount of money every month towards something big, like a family vacation, a car, or even a new set of tires for our older car. The point is, we are thinking ahead about expenses that we know are coming and we are not running to credit cards to finance them.
This is a great lesson for our children, no matter what their age. If they really want that new shiny toy or maybe that gadget, and when they are older that car, then teach them to create their own sinking fund to pay for it. They will value that item so much more when they have been saving for it for a while…and the same is true for us!
I also use a type of Sinking Fund, I call my Escrow Fund, for items in my monthly working budget that I do not have to pay for every month. These bills only come along every quarter, or once or twice a year, but I sink some funds monthly into this separate account so that, when those bills come, I already have the money to pay them in full. The great value from these Sinking Funds comes as more peace, since we are thinking ahead and preparing for the expenses we know will be coming up in the future. Saving for big expenses, and infrequently paid bills, will help us have, and maintain, financial freedom.
<>< Peace, Diane
