A sinking fund is money you set aside regularly for a specific future expense you know is coming—like holiday gifts, car repairs, annual insurance premiums, or a vacation. Instead of scrambling when the bill arrives or putting it on a credit card, you've already saved for it in small, manageable chunks. It's a proactive approach that reduces financial stress and keeps you from derailing your budget when predictable expenses pop up. Think of it as paying yourself in advance for the things you know you'll need, creating breathing room instead of surprises.