Sinking Fund Calculator (regular deposit to repay a bond or replace an asset)

Understanding the sinking fund calculator — concept and principle

A sinking fund sets aside equal deposits so that a known amount is ready on a set date, for example to repay a bond at maturity, replace a machine or fund a big purchase. This calculator finds the deposit per period, the interest earned and the sinking fund factor.

At 4%, deposits of $41,645.47 a year reach $500,000 in 10 years; interest supplies $83,545 of it.

How it is calculated

Interest per period: i = annual rate ÷ deposits per year; n = years × deposits per year.
Gap = target − what money already in the fund grows to: target − P × (1 + i)^n.
Deposit = gap × i ÷ ((1 + i)^n − 1). The fraction i ÷ ((1 + i)^n − 1) is the sinking fund factor.
For deposits at the start of each period, divide the factor by (1 + i).
If existing money already grows past the target, the deposit is 0.

The principle

Equal deposits that earn interest grow along the future-value-of-an-annuity formula: deposit × ((1 + i)^n − 1) ÷ i. A sinking fund turns that formula around: given the target, solve for the deposit. The sinking fund factor is the deposit needed per 1 of target; it is the reciprocal of the future-value annuity factor. Interest does part of the work, so you deposit less than the target in total.

Worked example

Default inputs: target 500,000 USD in 10 years, 4% a year, one deposit a year at the end of each year, nothing in the fund yet.

i = 4%, n = 10 deposits.
Sinking fund factor = 0.04 ÷ (1.04^10 − 1) ≈ 0.0833.
Deposit = 500,000 × 0.0833 ≈ 41,645.47 USD a year.
Total deposited = 41,645.47 × 10 ≈ 416,455 USD; interest earned ≈ 83,545 USD (16.7% of the final fund).
After half the deposits (5 years), the fund holds ≈ 225,565 USD.

Each point is the calculator re-run with only “Years until it is needed” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Years until it is needed	Deposit per period
2.5	$160,174.27
5	$92,313.56
7.5	$54,263.92
10	$41,645.47
12.5	$30,071.86
15	$24,970.55
20	$16,790.88

How to read the result

The higher the rate and the longer the time, the smaller the deposit. If the rate is uncertain, use a cautious one so the fund is not short. Checking the halfway balance helps you see whether you are on track.

Common mistakes

Using an annual rate with monthly deposits without converting.
Forgetting money already in the fund.
Assuming a steady rate when it can change.
Ignoring taxes on interest in a taxable account.

Keep in mind: The calculation assumes a constant rate and regular deposits; taxes are ignored. This is not financial advice.

Frequently asked questions

What is a sinking fund?

Money set aside in regular deposits to meet a known future cost or debt repayment.

What is the sinking fund factor?

i ÷ ((1 + i)^n − 1), the deposit needed per unit of target.

How is a sinking fund different from an emergency fund?

A sinking fund saves for a known expense and date; an emergency fund covers unexpected costs.

Sources: Brigham & Houston, Fundamentals of Financial Management (sinking funds and annuities) · Kellison, S. G., The Theory of Interest (sinking fund method)

Checked 9 Nov 2026. Future value of an ordinary annuity and an annuity due, solved for the payment (sinking fund factor i ÷ ((1 + i)ⁿ − 1)): standard time-value-of-money formulas.

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