A sinking fund is money you save up gradually for a specific, known, upcoming expense — setting aside a little each month so that when the cost arrives, you've already got the money rather than being caught short or reaching for credit.
Sinking funds are ideal for the predictable-but-irregular costs that tend to blow budgets because they come in lumps: Christmas, a car service or MOT, an annual insurance premium, holidays, birthdays, or a known future purchase. You know they're coming and roughly what they'll cost — you just need to spread the saving.
They're different and you ideally want both. A sinking fund is for a known, planned expense you're deliberately saving toward. An emergency fund is for unexpected costs — a boiler breakdown, a job loss — that you can't predict. One is planned saving; the other is a safety net.
Work out the total you'll need and when, divide by the months until then, and save that amount monthly — ideally in a separate pot or account so it doesn't get spent. Running several at once covers the year's big costs smoothly. Our free sinking funds planner helps you set them up. This is general information, not financial advice.