sinking fund: meaning, definition, pronunciation and examples
C1Formal, Technical, Financial
Quick answer
What does “sinking fund” mean?
A fund established by an organization, typically a corporation or government, by setting aside money regularly to repay debt or replace assets at a future date.
Audio
Pronunciation
Definition
Meaning and Definition
A fund established by an organization, typically a corporation or government, by setting aside money regularly to repay debt or replace assets at a future date.
A financial reserve created through periodic contributions, invested to accumulate over time, specifically earmarked for the redemption of bonds, debentures, or other long-term debt, or for the planned replacement of a capital asset. It is a proactive financial management tool to avoid large, lump-sum future expenses.
Dialectal Variation
British vs American Usage
Differences
No significant difference in meaning or usage. Spelling conventions follow national norms (e.g., 'fund' vs. 'fund').
Connotations
Identical technical and formal connotations in both financial and governmental contexts.
Frequency
Equally common in professional finance and economics in both the UK and US.
Grammar
How to Use “sinking fund” in a Sentence
The [ENTITY] established a sinking fund for [PURPOSE].Contributions to the sinking fund are made [FREQUENCY].The bond has a sinking fund attached to it.Vocabulary
Collocations
Examples
Examples of “sinking fund” in a Sentence
verb
British English
- The company is sinking-funding its debentures.
- They plan to sink-fund the liability over ten years.
American English
- The corporation is sinking-funding its bonds.
- The municipality will sink-fund the infrastructure debt.
adverb
British English
- The debt was repaid sinking-fundly over the term. (Extremely rare/unnatural)
American English
- (No standard adverbial form exists for this noun compound.)
adjective
British English
- The sinking-fund mechanism is outlined in the prospectus.
- They made the required sinking-fund contribution.
American English
- The bond has a sinking-fund feature.
- The sinking-fund account is held with a trustee.
Usage
Meaning in Context
Business
The board approved the creation of a sinking fund to repurchase shares in five years.
Academic
The study analysed the impact of sinking fund covenants on corporate bond yields.
Everyday
Rarely used. A homeowner might loosely refer to saving for a new roof as a 'sinking fund'.
Technical
The indenture requires semi-annual sinking fund payments equal to 5% of the original principal.
Vocabulary
Synonyms of “sinking fund”
Strong
Neutral
Weak
Vocabulary
Antonyms of “sinking fund”
Watch out
Common Mistakes When Using “sinking fund”
- Using 'sinking fund' to mean a general emergency fund (it is purpose-specific).
- Confusing it with a 'depreciation fund' (for accounting) though related in concept for asset replacement.
FAQ
Frequently Asked Questions
No. A sinking fund has a specific, pre-defined purpose (e.g., repaying debt), while a general savings account is for discretionary or multiple future uses.
It is typically managed by the corporate treasurer or finance department, often with oversight from a trustee as required by the debt agreement.
Yes, the money in a sinking fund is usually invested in low-risk, liquid securities (like government bonds) to generate a return before it is needed.
It is typically considered a default or breach of the debt covenant, which can allow creditors to demand immediate repayment or take other legal action.
A fund established by an organization, typically a corporation or government, by setting aside money regularly to repay debt or replace assets at a future date.
Sinking fund is usually formal, technical, financial in register.
Sinking fund: in British English it is pronounced /ˈsɪŋkɪŋ fʌnd/, and in American English it is pronounced /ˈsɪŋkɪŋ fʌnd/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “None directly associated; it is a technical term.”
Learning
Memory Aids
Mnemonic
Think of a ship with a slow leak. A 'sinking fund' is the money you regularly set aside to eventually fix (or 'sink' the debt of) the ship before it becomes a crisis.
Conceptual Metaphor
FINANCIAL OBLIGATION IS A BURDEN / DEBT IS A HOLE. The fund 'sinks' or fills the hole of debt until it is level (repaid).
Practice
Quiz
What is the primary purpose of a sinking fund?