Many savers have one savings pot and wonder why it keeps getting drained. The reason is usually that two different kinds of costs are competing for the same money: genuine emergencies, like a broken furnace, and predictable expenses, like car insurance or holiday gifts, that simply were not planned for. Separating them into an emergency fund and sinking funds solves the problem.

An emergency fund handles the truly unexpected. Sinking funds handle the expected-but-irregular: costs you know are coming but do not pay monthly. Keeping them apart protects your safety net from everyday predictability.