The following is my
answer to a Quora question: “In regards to personal finance, what
is a sinking fund?”
Technically, a sinking fund is monies set aside in
anticipation of paying a debt. In
personal finance, it has no use since a person is not issuing a bond, and has
an institutional credit rating to maintain.
A person putting money aside is not putting money in a sinking fund. He is simply saving up for a specific purpose.
The only time a sinking fund may have a
use is with regards a settlor or beneficiary borrowing from his own trust fund,
since the trust is considered a separate legal entity.
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