Sinking funds: the trick that makes Dashain and Tihar spending painless
Festival spending isn't an emergency — it happens every year, on a known date. A sinking fund spreads the cost across 12 months so Dashain stops borrowing from January.
Every January in Nepal, two things happen at once. People who spent comfortably on Dashain and Tihar quietly tighten everything for two months — fewer eat-outs, postponed bike services, "maybe next month" on a school admission deposit. And they tell themselves, every year, that next year they'll plan ahead.
The reason it doesn't happen isn't willpower. It's the way the budget is shaped. A regular monthly budget makes a festival look like a sudden rule-breaker — a one-time cost that smashes through every category for a month. It isn't. Dashain is on the calendar before you wake up on January 1st. The math has been knowable for centuries.
A sinking fund is the small re-shaping of the budget that makes that knowable cost stop hurting. This post is about why it works, where to put one in Nepal, and the four categories where it earns its keep.
Why festivals break ordinary budgets
Festival spending is enormous in Nepal — and concentrated. By common estimates, Dashain alone accounts for tens of billions of rupees in nationwide spending each year, and a significant share of annual retail trade happens in the Dashain–Tihar window. That isn't a quirk; it's the shape of the year.
If you earn evenly each month and spend lumpily, you're running a cash-flow problem, not an income problem. Two ways to solve it:
- Borrow against the future. Credit card, loan from family, breaking an FD. This works once, and creates the cycle that makes January feel like punishment.
- Pre-fund the lump. Take a piece of every month's income and pre-load the festival expense before it arrives. This is the sinking fund.
The festival allowance — under Section 37 of the Labor Act 2074, every salaried employee is entitled to one month's basic salary as festival allowance — does some of this work for you. But basic salary is rarely the same as total festival spend, especially once travel home, gifts to extended family, and new clothes for everyone are added in. The allowance covers part of the budget. The sinking fund covers the rest.
Sinking fund vs. emergency fund — don't mix them
A common mistake: using the emergency fund for things that aren't emergencies. Dashain on the 10th day of Ashwin is not an emergency. A flat tyre on the way home is.
The clean rule:
- If you can write the month and rough amount on a calendar a year out → sinking fund.
- If it's sudden, involuntary, and you couldn't plan for it → emergency fund.
Mixing the two is the single most common reason emergency funds get drained — they get raided for festivals, weddings, and birthdays, and then there's nothing there for the actual hospital bill in February.
The math, in one paragraph
Pick the target. Divide by the number of months until you need it. Save that much, every month, in a separate place. That's it.
For Dashain, with a target of रू 24,000 and 12 months until the next Dashain:
रू 24,000 ÷ 12 = रू 2,000 / month
If you start in mid-cycle — say it's May and Dashain is in October — you have 5 months. The same target becomes रू 4,800/month, which is harsh. Better: split this year's shortfall (you'll cover most of it from the festival allowance + some monthly savings) and start the next cycle clean from November onward. The first sinking fund you build will always be the hardest. Subsequent years are smooth.
The four sinking funds most households actually need
Build them in this order. Don't try to spin up all four at once — that's how the whole project gets abandoned.
1. The festival cluster
The single highest-yield sinking fund for almost every Nepali household.
Lump together every festival you actually celebrate — Dashain, Tihar, Teej, Holi, Lhosar, Chhath, Christmas — into one pot. Don't over-engineer it; one category is easier to fund and reach into than five.
To set the target, look at last year. What did you spend on:
- Clothes (new outfits for self, partner, kids)?
- Gifts (cash and goods)?
- Food and home preparations?
- Travel home (bus tickets, fuel, gifts brought along)?
- Eating out and outings during the holidays?
Add it up. Round up 10% for inflation. That's the target. Divide by 12 to get the monthly contribution.
A working profile:
| Profile | Annual festival target | Monthly contribution |
|---|---|---|
| Single professional in Kathmandu | रू 15,000 – 30,000 | रू 1,200 – 2,500 |
| Couple, no kids | रू 30,000 – 60,000 | रू 2,500 – 5,000 |
| Couple with one child | रू 50,000 – 1,00,000 | रू 4,000 – 8,500 |
| Multi-generational household | रू 1,00,000 – 2,00,000 | रू 8,500 – 17,000 |
These are honest middle-of-the-road ranges, not aspirational ones. Adjust based on what last year actually cost.
2. The wedding & invitation fund
Nepal's wedding season — Mangsir to Falgun, with a smaller cluster around Jestha — is the second-largest festival-shaped expense for most households. The cost isn't one wedding; it's the cumulative cost of every wedding and brataband you're invited to in a season, plus your contribution to family weddings (clothes, gifts, sometimes travel).
If you went to four weddings last year and spent रू 5,000 each (cash gift + clothes + transport), that's रू 20,000. Divide by 12 = रू 1,700/month. The fund means December doesn't become "the month I went to four weddings and ate biscuits at home for two weeks."
3. The annual insurance fund
Health insurance, vehicle insurance, and life-insurance premiums tend to land in 1–2 lump payments a year. For a typical urban household, total premiums sit somewhere between रू 10,000 and रू 50,000/year.
Take the total. Divide by 12. Save it monthly into the same account it'll be paid from. When the premium notice arrives, the cash is already there.
This is the sinking fund with the strongest cost-of-failure: lapsed insurance because the premium "came at a bad month" can wipe out years of premiums in one uncovered event.
4. Vehicle service & repair fund
If you own a bike or car, an annual service plus 1–2 repairs is a known annual expense, even if you can't predict the exact months.
Rough monthly contributions:
- Scooter / bike: रू 500 – 1,000/month → covers servicing, tyre changes, occasional repairs.
- Small car: रू 1,500 – 3,000/month → covers servicing, occasional larger repairs, insurance separate.
This fund overlaps with what an emergency fund could cover, but separating it has a behavioural advantage: the emergency fund stays full and feels untouchable, while the vehicle fund is allowed to flex up and down.
Where to actually keep sinking fund money
The same logic as the emergency fund but with one relaxation: yield can matter a little, because some sinking funds have a known maturity date.
| Vehicle | Fit for a sinking fund |
|---|---|
| Regular savings account | Yes. Default for any fund needed within 6 months. |
| Separate-bank savings account | Best. Out of sight from spending account. |
| 6-month FD | Reasonable for 6–12 month funds (e.g. next year's Dashain in May). |
| 1-year FD | Only if maturity is timed to the spend date. |
| NEPSE / mutual fund | No. A 30% drawdown a month before Dashain is a real outcome. |
The single highest-impact behavioural move is opening the sinking fund account at a different bank from your salary account. The friction of transferring it back to spend is small enough that it doesn't prevent legitimate use, but large enough that it stops you from raiding it for a Saturday outing in March.
A working schedule for someone starting from zero
Suppose your monthly take-home is रू 50,000 and you've been saving the recommended ~20% — रू 10,000 — into a single "savings" account that does everything.
Once your 3-month emergency fund floor is covered, split that रू 10,000:
- रू 5,000 → continues to emergency fund until 6-month target reached
- रू 2,500 → festival cluster sinking fund
- रू 1,500 → wedding/invitation fund (if applicable) or annual insurance fund
- रू 1,000 → vehicle service fund (if applicable)
Once the emergency fund hits 6 months, that रू 5,000 is freed up — redirect it to a goal-dated investment or a larger sinking fund. The point isn't to maximise sinking funds forever; it's to fund the lumpy, known costs and free up the rest for goals.
What "painless Dashain" actually feels like
The first year you do this, the change is small. The festival allowance plus three or four months of contributions covers most of the spend; the rest still feels tight. The second year is where the magic happens — you arrive at Tihar with the target already in the account, and the entire holiday goes by without a single "can we afford this?" calculation.
The third year, you'll find yourself adding new sinking funds: a phone replacement fund, a yearly travel fund, a kid's school admissions fund. The technique scales without becoming a job.
It's not glamorous. There's no compounding magic, no investment thesis, no story to tell at a dinner. It's just the quiet system that keeps January from being awful.
What you actually need to know
Three lines:
- Festivals are not emergencies. They're on the calendar. Pre-fund them.
- One pot per category, not one pot for everything. Festival, wedding, insurance, vehicle — separate budgets, same account is fine.
- The first year is the hardest. Don't try to fully fund five categories on day one. Start the festival cluster, get to a clean cycle, then add the next.
If you do nothing else after reading this, open a second savings account this week, set up a रू 2,000 monthly transfer into it labelled Dashain 2027, and forget about it. Next October will feel different.
Got a household profile or a festival you'd like covered next? Email parjanya57@gmail.com.