NerdWallet's Smart Money Podcast - Tariff Uncertainty After Supreme Court Decision and Budgeting With Sinking Funds

Episode Date: February 26, 2026

Find out how tariffs may change prices and how to build sinking funds while saving for retirement. What could the Supreme Court’s tariff ruling mean for the prices you pay and the next move on trade policy? How much should you set aside for sinking funds while you build an emergency fund and contribute to your 401(k)? Hosts Sean Pyles and Elizabeth Ayoola discuss sinking funds and savings priorities to help you balance long-term goals with near-term costs. But first, senior news writer Anna Helhoski joins Sean and Elizabeth to unpack the Supreme Court decision limiting “reciprocal” tariffs tied to the International Emergency Economic Powers Act (IEEPA) with Lourdes S. Casanova, senior lecturer at Cornell University’s SC Johnson College of Business. They dig into the big open questions the ruling raises, including what legal paths might still allow new tariffs, how trading partners and markets could respond, and what tariff refunds and lawsuits could mean for businesses and consumers. Then, Sean and Elizabeth discuss sinking funds and how to decide what percentage of your income to dedicate to them when you’re also trying to hit a retirement savings target. They cover what sinking funds are and why they’re useful, where to keep the money (and why a high-yield savings account often fits), and how to use frameworks like 50/30/20 and time horizon to choose between saving versus investing for specific goals. Best High-Yield Savings Accounts for February 2026: Up to 4.21% https://www.nerdwallet.com/banking/best/high-yield-online-savings-accounts  Are you on track to save enough for retirement? Use NerdWallet’s free retirement calculator to check your progress, see how much retirement income you'll have and estimate how much more you should save: https://www.nerdwallet.com/investing/calculators/retirement-calculator  Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. Learn more about your ad choices. Visit megaphone.fm/adchoices

Tech moves fast. So keep pace with the Daily Crunch podcast from TechCrunch. With new episodes every day, this podcast will give you a quick overview on everything you need and should know about startups, new tech, regulations, and more. Listen to TechCrunch Daily Crunch now, wherever you get your podcasts. That's TechCrunch Daily Crunch, wherever you get your podcasts. Tariffs. They're still here, but in a different way. Does that affect your wallet and bank account? Likely. How? How? Let's find out. Welcome to NerdWallet's Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayola. Later this episode, we'll be discussing sinking funds, which is one of Sean's favorite topics. But first, our weekly money news roundup where we break down the latest in the world of finance to help you be smarter. with your money. Last year, we saw President Trump rollout sweeping so-called reciprocal tariffs on imports from countries around the world. He said the levies were necessary to fight unfair

trade practices and also to protect the U.S. Last week, the Supreme Court dealt a blow to that strategy. And our news colleague, Anna Haloski, is here to talk more about what happened. Hey, Anna. Hey, Elizabeth and Sean. Yeah, soon after Trump announced his tariffs last year, the legal fight began. Companies and states argued that Trump didn't have the authority to impose sweeping tariffs under the rationale that he was using, and that's the 1977 International Emergency Economic Powers Act, which rolls right off the tongue, but it's usually known as AIPA. Trump said that it gave him the broad authority to enact tariffs during a national emergency, and as we saw last week, the Supreme Court didn't really agree with that. The ruling opened the door to a lot of

uncertainty around tariffs. So to unpack what happens next, today I'm joined by Lordeus Casano. Senior Lecturer at Cornell University's SC Johnson College of Business. Lourdes, welcome to Smart Money. Thank you for inviting me. So after the court said Trump can't use AIPA to justify these tariffs, he pretty quickly pivoted and said he would raise global levies to 10%.

And then the next day, he raised that level to 15%. So first off, can you talk a little bit about how he was able to do that if the court just ruled that he couldn't? I don't know the exact legalities of how he did it, but it was possible because of some legality somehow. And so the first day was 10% and the next day, 15%.

So what happened? A lot of confusion because in the meantime while after Liberation Day some countries, for instance, the European Union had negotiated one trade agreement that everybody knew what to do.

And then this new rule, this new tariff, was useless. So then the first thing that the European Union did was to please request President Trump to be faithful to what he had signed after a liberation day. So there is confusion because in some countries, for instance, China, Brazil or India, the current tariffs were worse.

And for some, again, the most important trade partner, the most important investor, the European Union was much worse for them. So a lot of confusion. We don't know what will happen. The stock market went up, down, the dollar, a little bit down, a little bit up. So you don't know how to react because you don't know what is going to happen. And a very important question as well, trust. So again, the European Union lost trust in the system.

So the new negotiation was very, very hard. And once the negotiation was there, okay, the Supreme Court says something, and President Trump says something else. So you don't know what is going to happen. Right. And any sense of how other major trading partners, Canada, Mexico responded to this new round? Yeah. Very important question. Canada and Mexico are under the ruling of the USMCA. Somehow they are sealed because this agreement is enforced. This agreement needs to be renegotiated this year. So both trading partners are worried. And Canada is going to negotiate with China, with

India, Mexico also getting closer to China, European Union rethinking the previous problems that they had with China and thinking that maybe they should renegotiate or reconsider what was before the trade world between European Union and China. So the targeted tariffs like steel and aluminum, they're not impacted by the ruling, right? But the 15% increase is going to be added on top of those tariffs? There are many other tariffs that are because of security reasons, and those are still valid. So those specific tariffs by sectors continue. So the situation is extremely complex and a lot of new negotiations will take place.

And I hope that they are resolved soon. Otherwise, we are again in an impasse. Let me play for one minute, Devils Advocate. Let's remember that what had happened in this country was a deinderella. industrialization. One could argue manufacturing need to be back in the US or not. That's a very important question that is not resolved. But what is the idea with the tariffs? The idea with the tariffs is to force companies to bring back manufacturing. And interestingly enough, in 2025, US again was the receptor of most investment, what is called Greenfield Investments,

So investments in manufacturing. So one could argue that these tariffs somehow may have worked because the trend was reverse of losing manufacturing jobs. And living in Isaka, upstate New York, let me tell you, needs manufacturing jobs back because it's a very depressed area, not enough jobs. And you travel by bus from Ithaca to New York, and you can see the need that this country has. to bring jobs back.

Now, do you see this ruling is signaling a turning point in U.S. trade policy and executive limits as well, or does it seem like more of a temporary bump in the road for the Trump administration? My opinion is that Trump administration, they want to continue this path, and tariffs have no way back. These discussions are on the table. They were not. We all believe since the 90s that open global world will be good for everybody.

And what has happened is that US and Europe have lost a lot of manufacturing jobs. And now the discussion is that they went back. For a while, we decided, you know what, it doesn't matter. We are strong in finance, in patents, in innovation. It doesn't matter if the iPhone is manufactured in Cupertino or Foxconn is the one manufacturing in China and Taiwan. Guess what? Now we realize that it does matter because the number of top companies, manufacturing

in smartphones, if you look at the five or the six biggest ones, only Apple is there. All the others are Chinese or Korean, Samsung, Opos, Shomi, of course, Huawei, etc. And that's why one way or the other, industrial policy is back and tariffs are back. But yes, it has to be done in a different way because you have to trust and you have to have stability in the rules. Otherwise, how can you adjust? So then this completely, what happened in the last days, has been very disturbing for the allies of this country, definitely for European Union, for UK. And beneficial, strangely enough, for China, India, Brazil.

So how have the U.S. and global markets reacted to this most recent trade policy chaos? They've had a lot to react to in the last year. Since Liberation Day last year, the dollar started to. go down. The dollar is so important, it's so central in this economy, innovation, technology, of course, but the dollar is very central. And then because of this beginning of cracking into the trust, the dollar started going down. And President Trump said, I don't mind the dollar going down because there are many other variables. What about the huge debt of this country? So then if you devalue your currency, you have to pay less. Many different factors.

So the dollar went down. The stock market first went down and I'm the panicky type. So I wanted to sell absolutely everything. This is the end of the world. And so many Americans, 4.1Ks depend on the stock market. So at first in April, a disaster. But since then, as you know, there is, okay, some they call it a bubble because of AI, because of other things.

The markets have recovered. And the dollar, with respect to the euro, that is the second most important currency in the world has gone down to 1.18. But let's remember that the dollar with respect to the euro, so one euro is 1.18 dollars. But let's remember when the global financial crisis in 2008, that affected less Europe at first, the dollar went further down, one year to 1.6 to the dollar. So yes has gone down, but let's see what happens. And second as well is that inflation, everybody talks about inflation, and inflation is now a relatively low point, 2.4%.

So we don't know yet. There are so many variables, geopolitical uncertainty, many aspects, et cetera. But yes, one thing that has been lost is trust for sure. And how does this trade policy impact investor confidence in the U.S. as a place to do business? And yes, you hear, you know what the dollar is going down, there is uncertainty. Emerging markets have done a little bit better. The currencies have revalued or better the dollar has gone a little bit down. Stock market here is so broad, so deep.

The volume is unbeatable. So then, yeah, even if you have lost trust, then where do you go? Do you go to China? Do you go to other countries? So emerging markets is like the Sisyphosmith. You push the stone up the mountains. And all of a sudden, there is a currency devaluation, there is a geopolitical problem, and then the markets go feather down.

So we have seen, yeah, there is a lot of talk about that. But the dollar continues to be the currency of the world. And the stock market has done extremely well this year, in spite of some ups and downs. So I'm hoping to talk a little bit about some of the unknowables for businesses, mainly refunds. Earlier this week, FedEx said that it was suing the federal government for a full refund of the tariffs it paid. That was the first suit from a major U.S. company since the decision was made. But some other companies like Reblon and Costco had already sued for refunds ahead of the ruling.

So if companies successfully secure those refunds, there's also no mechanism to pass that back to consumers, right? Of course not. But again, President Trump has said that maybe rebating will. give a check of rebate of $2,000. Has been talking about that. For companies, also difficult. So let's see what will happen in the next days. We are moving to another era, and the new era is industrial policies,

nationalizations have happened in Europe, for sure, and more scrutiny regarding trade. I mean, the success of China was for everybody mind-boggling. And to a certain extent, since China has won and has been so successful, With another economic model, everybody's thinking, maybe we were wrong and maybe the government needs to have a place, not only regulating, but intervening in the business world. So we have seen that earlier in Europe. Europe, there is always more weight.

So between China, let's say, that is a state capitalism and the United States, that is clearly a market economy. So we see, strangely enough, all moving to a more important role of the government. So bringing this back down to the average person who's just trying to make online purchases, buy groceries, what's the realistic outlook for them amid all this uncertainty? This Harvard study says $1,000. We all have paid $1,000 more. If we look at inflation, as I said, 2.4%. So the inflation, yes, there is inflation, but not that much as one could have expected if you have, let's say, 10% tariffs to accrued.

cross the board in everything or 15%. So inflation should have been higher. So there are many different moving pieces here and remains to be seen what will happen. And so far for the first year, things are reversing, but it would seem a certain consensus to say, okay, let's see if this works. For sure, we need real jobs, some manufacturing,

Okay, it was talks that a semiconductors factory would be coming to Syracuse. Let's hope so. Remains to be seen. But more meaningful jobs. I mean, small farmers is subsistence economy. So we need that. And this is trying to get them back. Let's see what will happen.

All right. Lourdes Casanova, senior lecturer at Cornell University's SC Johnson College of Business. Thank you for helping us out today. Thank you, Anna. Thank you, Anna. Up next, we answer a question about sinking funds. But before we get into that, we'll be in Scottsdale in a few weeks. Yay!

And we want to answer your money questions in person. And when I say we, I mean me and Sean. We would love to talk you through debt repayment options or go through your budget for our budget rehab series. So if you'd like to hop on the show and meet us in person, leave us a voicemail or text us on the nerd hotline at 901, 730, 6373. That's 901 730 NERD. You can also email us at podcast at nerdwollet.com. And you can leave us your money questions anytime and a comment on Spotify or YouTube as well. In a moment, this episode's money question.

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We're back and answering your money questions to help you make smarter financial decisions. This episode's question comes from John, who sent us a text. Hello, my name is John, and I'm currently trying to save up to a three-month emergency fund. I plan to eventually contribute about 15% of my income toward my company 401k. At the same time, though, I want to invest money monthly into sinking funds for things like a new car, vacations, etc. What is a good percentage of my income to put toward these sinking funds after I'm investing 15% into my 401k? Now, this episode, Sean and myself are going to take on John's question on our own. Yes, we are.

All right, let's dive in, Sean. Let's start by talking about what a sinking fund is. You know, I was talking to my partner about sinking funds, and he's like, what's a sinking fund? So not everyone knows what a sinking fund is. We are big fans of sinking funds, also called savings buckets, but it's essentially having a different account for a different saving purpose. So I have a number of them, and we'll get into the details of that in a minute, but it's great to have different goals allocated in these accounts. So like John said, they want to buy a new car. They want to go on vacations. It can be really nice to allocate certain amounts of money into these different accounts each month, from your paycheck. So you're now you're making progress on different goals at the same time without

having some big kind of nebulous wad of cash in a savings account that's just for these different goals. I feel like you're throwing me shade. I feel like you're being shady because I have this you are because I have disclosed in the past that I had a big wad of cash and I would just randomly pull from it. And yes, it was it was a little messy. However, you've since come around to the sinking fund mindset, which we will get into in a moment. I don't want to spoil that. But I'm excited to hear how they're going for you. And something to think about Tula Sinking Funds is that it's essentially a form of mental accounting. And sometimes people describe mental accounting, which is really just when you prescribe different pots of money, different values, as something

that can be almost detrimental to your finances, because at the end of the day, a dollar is a dollar, no matter what account you have it in. But again, I really actually like doing this because it's a really helpful trick for you managing your money. And a lot of personal financial management is setting up little tricks for yourself so you can accomplish your goals with the resources that you have. Yeah. And I think for people who struggle with organization or who just like their financial goals to be more visible, sinking funds can be helpful because you can literally see money for each goal in a separate pot and you know where everything is going. Yes. And some banks, depending on which one you're using, will allow you to name the fund that you

have. So in my high-old savings account, I have various ones. And they're all labeled so I know exactly what's going where, no need to track what the account number is. Yeah. And speaking of high yield savings accounts, that is an easy plug for you guys. If you do want to create a sinking fund, putting one in a high yield savings account can be very helpful. Why? Because you get lots of interest. Well, lots is relative. But you get interest on the money that you're saving. Yeah. And that brings me to a key word in John's question is that they said they want to invest money monthly into sinking funds. I will put my money in my sinking funds into a high-led savings account, which isn't necessarily investing.

It's just saving. But this comes down to a matter of your time horizon, too. I think if John has a longer-term goal, like if they know they don't need a car right now, but they might in five to seven years, in that case, they might actually want to invest this money in a sort of sinking investment fund for this purpose. And generally, a good rule of thumb is that if you don't need money within five years, then you might want to keep it invested because you can get, generally a better return. We never know what the market is going to do, but that's just often the

case. But if you need your money in five years or less in that case, you probably want to keep it in a high-old savings account. One thing I run into a lot when I talk about sinking funds is that people think that this is a really complicated strategy because at certain points in my life, I've had around 10 different accounts and people say that is bananas. Yeah, how do you keep track of all these accounts? Well, it's actually super, super easy. You basically make a sub-account for each purpose and you label it according to whatever the goal is. And for me, the real secret to success is direct automated deposits from each paycheck. So in the back end of my paycheck at NerdWallet, I can allocate, I want 5% to go towards this account or 2% to go toward that account, adding up to 100% of my paycheck, obviously.

And that way, my savings are going into these places and I'm not really thinking about it. When you first set this up, you're going to want to double check that your payment processor is actually doing this properly. I have run into issues with that. in the past. However, once you're confident that the direct deposits are working properly, just sit back and relax and watch your money grow. I have a follow-up question for you, Sean, the sinking fund expert here. Do you have all of your sinking funds with one provider, or do you have multiple accounts across multiple banks? I guess the answer is yes to both questions because I primarily bank with one online bank, and I have all of my sub accounts there, all my

thinking funds there, but I just opened a couple other accounts with a new online bank that has more ethically aligned practices for what I want my bank to do. I have yet to actually migrate everything over to this new bank. I'm planning on doing that sometime soon after I file my taxes, maybe. It's on my to do list. So eventually I will have everything over to this new bank. I'll close out my old bank. And because I just want to keep it all within one bank's ecosystem, navigating different accounts across different banks just sounds too confusing for me. Absolutely. And that's what I wanted to pull out there because if any of the listeners out there are like me, I do not like managing multiple banks at once. And that can be an impediment to you starting a sinking fund in the first place.

If you feel like you have to open multiple accounts and multiple banks. Yeah. But that said, my general checking account is a local credit union in the Portland area. That's different from the bank that I use for my sinking funds because that's an online high-old savings account. So I think it's okay to have a couple of different accounts. I actually, I guess technically bank with four banks because I have a small account that is connected to my mom so that she can get my portion of the cell phone bill. I've had this account open since high school. I've talked about it probably a million times on this podcast before. And I just keep it open because I'm lazy and that's how I send my mom money each month. But yeah, for day-to-day banking, I really just use two accounts. Yeah. So I would not

recommend but suggest that people do what creates the most ease because that's what financial management is about the more complicated it is, the harder it is to keep up with it and to stick with it. Yeah. Another question I get when I talk about syncing funds is how to find the right account for you. So, Elizabeth, how did you find the bank that you are currently using? I'm pretty straightforward. So I go where the money resides. And that means I'm going for whoever has the highest interest rate. So I want the best return on my money. And that's essentially how I pick. But yes, this is a cheeky plug, but it's honest. I use nerd wallet because we have articles that tell us who has the best rates. I also do think about when I'm looking for a bank ease, so I'd like to make sure

that customer service is easy to reach in case I need any help, and that they're accessible. I'm not a big app person, so I know some people are like, oh, I won't use this bank if I don't like the app experience, but I'm just pretty simple. So ensure that I can easily get help and that you have a good rate. Those are my two top things. I'm similar to you. I want a good rate. I also rely heavily on Nord Wallach Roundups. I was actually shopping around toward the end of last year after we had a couple interest rate cuts and the bank that I have been using for years and years was more aggressively cutting the yield that they were giving people on their high-led savings accounts, which didn't make me too happy. So I found this other bank that again was more aligned

with my values, my ethics, and they had a better yield, which is ultimately at the end of the day, kind of what you want your money to do is get a better return for you. That's right. And I changed mine. I had been using my high-yield savings account, I think, for four years. But yeah, like you said, the rates kept going down. And I was like, well, why am I sticking with bad rates, you know? And I switched in December as well. Get that money. That's right.

Okay. Well, let's turn to another key part of John's question, which is an emergency fund. They say they want a three-month emergency fund. I have some thoughts about how big an emergency fund should be. Do you want to kick us off and tell us about, you know, how much people should maybe have or what your thoughts are there, Elizabeth? Yeah. I think the rule of thumb is that you should have three to six months worth of income in your

emergency fund, if you are a single income household like me, then you should be closer to the six month mark just in case of an emergency, since I don't have anybody else's finances to lean on. So I think that's the rule of thumb there. Yeah, and I'm pretty aligned with that too. I realize that that's a really difficult thing to save toward for a lot of people. So understand that building up an emergency fund can be a multi-year goal. And right now, I'm continuing to add more to my emergency fund even though I'm at the point where, you know, I'm in a two-income household. I have three months saved in my emergency fund. That's another rule of thumb there. And I feel okay with that amount, but I also like to pat it out because the world is unstable and the job market is tough. So having

an emergency fund is your best line in defense against going in debt if and when an emergency does pop up. So just stash away as much as you can. Don't beat yourself up if you don't have three to six month worth of savings, even $1,000 can go pretty far, preventing you from pulling out that credit card when your car breaks down. That's it. And I know if anyone is like me out there, sometimes you feel guilty when you pull from your emergency fund. So I also want people to remember the emergency fund is supposed to ebb and flow because

emergencies will come up. So it's okay if you've depleted your emergency fund and you're rebuilding it, like Sean says. That takes time. Yeah, that's a good reminder because every time I use funds from sinking funds, I feel kind of guilty in a weird way because I've been saving up so diligently and then I had to pull the money out. And now I feel like much poorer than I did 24 hours before. But that's the whole point of these funds anyways. You're supposed to be using the money.

I had that experience with my wedding fund where I'd been saving up. I had around $20,000 that I'd been building up over five years for my wedding. And then over the course of four weeks, I just spent so much money on the wedding. and I felt like I was doing something totally irresponsible, but in fact, I was doing the most responsible thing. I was saving the money I put aside. So talking yourself out of feeling bad for spending money can be kind of a challenge sometimes. Yeah. And doesn't it just feel good to see all that cash in your account? You just don't want it to go down. I think it's sad as well. I want a big number in my account. That's it. All right. So John also wanted to know how much of their money

they should save. So we love the 50, 30, 20 framework here at NerdWallet. And for those who are not familiar with that, 50% go to needs, 30% to wants, and 20% to debt and savings. Now, this includes retirement savings and sinking funds. So for John, that 20% could go towards the sinking fund. Yeah, and something people don't often consider is that when they want to save, say, 15% of their income toward retirement, that includes their employer match if they get one. So say, John's employer matches 4%. In that case, they only really have to save 11% of their income for retirement. And something I want to throw out, too, is why we even talk about 15% of your income as a savings goal for retirement. This is a common rule of thumb that a lot of financial planners will say will help you tuck away enough for retirement.

Although that's not inclusive of every circumstance that you might have in your life, we talked a few weeks back with a financial planner from NerdWallet wealth partners about how financial planning is so individual. And folks listening, if you have not yet, play with NerdWallet Retirement Calculator, get a feel for the numbers that you might need to hit and how much money you might need to be tucking away and what that might mean for a percentage of your income for retirement savings. Yeah. And I just want to say as well, if John did want to use the 50, 30, 20 framework, they could put 15% of their income towards their 401k as they're already doing. And then that extra 5% could go towards their sinking funds. If you are an ambitious saver and you have big sinking funds goals, you could always increase that 5% and maybe pull money from that wants bucket.

just so that you can save more money. John's question also brings up the topic of financial priorities. Which one should you put first, saving for retirement or building up your emergency fund? In general, it's going to be a smarter idea to get to at least $1,000, hopefully that three to six-month mark in your emergency fund before you are really, really diligently saving for retirement. We know that people are playing the long game when it comes to retirement savings. You want to be able to tuck away as much money as you can, but you also need to protect yourself against the emergencies happening today. Since we're talking about financial priorities, there are also maybe priorities amongst your sinking fund goals, right? So I would like to categorize sinking funds into non-negotiable sinking funds and then lifestyle sinking funds.

So non-negotiables may be things like child care, which is an expense that comes up for me every year. Your car, it may not be a monthly expense, but it's one that tends to come up if you're maintaining it. Maybe annual credit card fees. It sounds like I'm talking about all my non-negotiable. I guess you are, yes. And then lifestyle sinking funds could go towards travel, a new car, things that are not essential, but things that you want just to enhance your lifestyle in some type of ways. So I think it may be good to prioritize the non-negotiables when you're working towards that sinking fund, building it up. And then, you know, you can put the lifestyle sinking funds under that.

Distinguishing between negotiable and non-negotiable sinking funds is such a personal matter too, because I hear you say your credit card annual fees. I think that could be a sort of lifestyle sinking fund because we don't need credit cards that have several hundred dollar annual fees every single year. That's a lifestyle choice that can become a necessity because of how you've thoughtfully had some lifestyle creep come about, which can be okay. But just be upfront about that. I agree. But if I have the card, then I have to pay the fee. So, you know? Unless you cancel it before the fee comes to. That is a hack. That is a hack. Okay, well, this is actually a great time to chat about our own sinking fund situations here. At one point, I mentioned I had around 10 different sinking funds, including some checking accounts.

But I actually have fewer today. Oh. I have eight. And so I have my emergency fund, taxes, fund money, car cash, house maintenance fund, student loans, and then those two main checking accounts that I use. So I guess technically just six sinking funds and then eight checking accounts total. That's reasonable when you break down what each one is for. Yeah. And I have two that I've retired that I haven't fully closed out.

One was my wedding fund because guess what? I already got married and I don't need that money anymore. And then the other one was a fund that I put together for my CFP education a couple years back when I was paying for classes for that. Yeah. And I think that that shows how funds can change over time. You can have a different purpose depending on your. current priorities and they don't need to be a forever thing. Why are you doing a student loan fund instead of just having it come out of, I guess, your general bill account assuming that you have one? This is a personal preference. I hate my student loans. And so I want the money that's coming for my student loans to be in its own account to quarantine it from the purity of the rest of my money.

Not the purity, Sean, really. That's just me being silly and petty about my student loans. Not everyone has to do that with their money. Yeah, and I think that goes to show you can personalize your sinking funds however you want to. I was just curious. And also it doesn't have to all be the most serious thing you're doing. Like, that is probably the silliest fund I have for my most frustrating bill. And that's a way that I can process it and make it a little bit easier to digest every month.

Absolutely. So, Elizabeth, you recently got into sinking funds. Tell me what your situation is. Well, since this is a safe space, I'll tell you. All right. So I only have one sinking fund right now. I do plan to open at least maybe one more, but I wanted to start since I'm new to sinking funds with my biggest pain point. And just as you hate your student loan repayment, I hate paying for child care. I hate paying for summer camp. I love it for my son. I love it for Io, but I hate it for me. It's not cheap. How much is it? Oh, my goodness. Every summer I spend at least at minimum $2,500. That's the least I spend. Just for the summer. Just for the summer. This is an ongoing child care. Yeah, just for the summer. I think the most I've spent is maybe around $3,000 for the summer. That would be a really nice vacation for yourself if you spent $2,500 on a summer vacation. I'm looking forward to that when camp ends to redirect that money somewhere else. But as I've said on the pod before, the expense comes every summer. And I'm shocked. and annoyed, and I'm pulling money from my savings because I haven't necessarily saved specifically

for that goal. Okay. So how are you putting money into the account on a regular basis to hit that $2,500 goal by summer? I am proud to say that I have opened a dependent care FSA. Now for those who don't know what that is, it is an employer-sponsored account. It has pre-tax benefits and you can pay for qualified dependent care services. So that includes preschool, daycare, summer camps, and all the things.

So I've opened one of those accounts. Technically, I don't know if we want to call this a sinking fund. Do we want to call this a sinking fund, Sean? If it's not a checking account or a savings account that you're putting money into, like I described, I wouldn't say it's technically a sinking fund. Okay. Fung funds are usually in these high-old savings account. Okay.

Well, in that case, I have an account that I'm saving for, but I don't technically have a sinking fund yet. But we're still doing the basics, right? We're setting aside money for a specific financial goal. There you go. Okay. And so you're putting money into. to this dependent care FSA, how much are you putting in on a regular basis?

Well, the thing that I do not love about the dependent care FSA is if you don't spend it, you lose it. So since this is my first year doing it, I didn't want to put too much. I believe I'm putting about $300 per paycheck towards the FSA account. And that will help me, especially come summertime, to be able to pay for those expenses with tax-free dollars. Well, I love to hear that. I'm glad that you're saving for this goal in your own way, even if it's not in the sort of

traditional high-led savings account sinking fund way that we typically talk about. So with that in mind, do you think you would ever come to my way of managing your money and maybe having a specific sinking fund in your house savings account for your travel because you love to travel or whatever sort of adventure hijinks you're getting into because you're always going like four-wheeling or zip lining? Have your zip-lining fund set up? Yes, absolutely. And my main goal, as we talked about in a previous episode, or one of my goals, is to say,

money towards my birthday. So I'm going to open a high old savings account for that. My goal holding myself accountable is to do it this weekend. It's just, you know, what's been stopping me is looking for all my information. Because when you have to open a new account, they're asking for information and it's either in my book or an app or somewhere else. And then I'm like, I'll do it later. So that's one of the main things that I want to save towards. I'd also like to save towards a vacation for me and IL this year because we're definitely going to go somewhere probably in August. So it'd be nice to start saving for that now. You might be surprised how easy it is to open a high old savings account. you can do it in 10 minutes.

What information do you need? Because for me, I just plug it all in and bada bada bada boom, new account. Well, I know this is not necessary for every account, but the last high-old savings account that I opened when I transferred my money at the end of the year, they usually ask you to deposit into the account. I know not every account has that as a requirement, but that's when I have to look for my banking information from the bank that I'm going to deposit the money from. And it's a little thing.

But, you know, it's just something I keep going. I'll do it later. Yes. I think that gets to how there. there are so many little administrative hurdles in the world of personal finance that discourage people from taking what should be an easy action, like setting up a bank account for this purpose should take you five minutes to do. But if you don't know your account login for where you currently have your money or you need to find some piece of paper that has all of your

account number and routing number, then you just throw up your hands and you say, I'll deal with it later. Next thing you know, three months have gone by. That's it. You're not using this account at all. You're not using the account. And the other thing, actually, now that you speak of that, the other admin thing I'm going to need to do is go to nerd wallet and then add, as you said, because I love to automate my, you know, deposits as well and make sure that my money is taken straight from my paycheck and put into that sinking fund. So two little annoying things that I need to do. Well, let me know if you want an accountability buddy. I'm happy to keep pestering you about this. Absolutely. So next week, ask me if I did it. And listeners, if you have any other sort of interesting

hacks for how you use sinking funds, let us know. We always love to hear what you. you are doing with your money. Remember, listener, that we are here to answer your money questions. So turn to the nerds and hit us up on the nerd hotline. You can call us at 901-730-6373. That's 901-730 nerd. Nerd. You can also email us at podcast at nerdwollet.com. Gather here next time to hear about how to accurately track your expenses. And in the meantime, follow smart money on your favorite podcast app. That might be IHeartRadio, Spotify, Apple Podcasts to automatically download new episodes. Here's our brief disclaimer. We are not your financial or investment advisor. This nerdy info is provided for general educational and entertainment purposes and may not apply to your

specific circumstances. And the episode that you're listening to, this one, was produced by Teth Vigland, Hillary Georgie, helped with editing, Nick Carysamy, and Eve Krogman, helm our audio and video production. Huge thank you to Nerdwallis editors for all their help. And with that said, until next time, turn to the nerds.