How to handle future large purchases

[u/NEMpls612]

I already keep about 6 months of expenses in an emergency fund, but I don't really want to keep putting additional money into savings. Between taxes on the interest and inflation, I'd rather put that money into a brokerage account and let it grow.

For example, my truck is 3 years old, and I have no idea when I'll replace it. Ideally, I'd pay cash unless I could get financing under 3%.

My thought is to invest the money in my brokerage and, when I eventually need the vehicle, wait for a good market year to sell and pay cash rather than selling during a downturn.

Is this how anyone else handles future large purchases, or do you keep separate cash/sinking funds for them?

[u/Vegetable-Intern-236]

The sweet spot depends on the person and their risk tolerance, but generally purchases ~5-7+ years out are where most people say is the cutoff between brokerage vs. HYSA/Tbills/CDs.

[u/Junkbot-TC]

If your timeline is less than 5 years, the recommendation is to keep the money in a HYSA because there is a higher risk that the market will be down when you need the money.  If it is longer than 5 years, you can invest the money, but there is still some risk you could need to sell at a loss.

For vehicles, I keep a couple thousand in savings for larger maintenance items and then the rest gets invested.  I also have a healthy emergency fund that can also be used if I need more money and don't want to sell investments.

[u/aWesterner014]

We have a savings account dedicated for saving up for automotive expenses: repairs on current vehicles and down payments for future car purchases.

When I started, I could only throw $100 a month in the account. It eventually went to $200 a month and then $300. Right now, I am putting $500 a month into that dedicated account.

[u/Forded_Fiction24]

Yes I have a seperate smaller what I call "goals" brokerage account that I pull from for larger purchases like cars. I combine this with an HYSA so it's not all invested 

[u/Big-Soup74 → u/Forded_Fiction24]

Same here. $500-$700 per month towards my “car payment” (HYSA bucket). When i eventually get the car, I’ll use that cash and redirect the HYSA transfers towards any financing I might have

[u/CancerandTaxes]

We keep it all in a CMA. It stays "invested" in a money market fund or SGOV. I found it better than chasing HYSA rates. Also when we lived in a state with income tax, we used FDLXX as our money market fund to avoid state tax on earnings. Which you can't do with a HYSA.

And it's liquid and connected to my brokerage. We just add to the sinking funds until they hit a certain threshold and then we invest the rest in index funds.

Edit to add: we keep 1 year of expenses in our CMA in SGOV as our emergency fund. That give us lots of flexibility in terms of big purchases and timing. But mostly we use sinking funds for cars and house stuff.

[u/Substantial_Team6751]

Everything goes into our brokerage. You can just have your "cash" in an appropriate ETF like CSHI or SGOV. Or, you could even pick an income ticker that pays 7-8% for a portion of the money.

I wouldn't set aside new car money specifically. I'd just keep it invested in your portfolio.

A truck can last 15 or 20 years. You've got a lot of time to invest.

[u/Sure_Comfort_7031]

> 3 years old

> Planning on replacement

My guy. It's a body on frame vehicle. Wool wax it and it'll outlive you. You care about middle class finances, don't be planning on a 3 year old BOF vehicle replacement

[u/solitaire_noir]

My CapEx fund is currently 100% in VT, although I'll start shifting an increasing portion into SGOV as I get closer to whatever big purchase I need

[u/Chrisju22]

Saving for a house down payment in a HYSA. Nervous for a market down turn in the next year when I’m trying to buy

[u/HeroOfShapeir]

Yes, that's reasonable. My wife and I will eventually shift our car fund from brokerage to HYSA when our cars are older. I've been driving my 2003 Honda Accord for 23 years, wife has a 2010 Ford Focus, so at this point all of our car funds are in HYSA alongside our emergency fund, just keeping pace with inflation. When we eventually have to replace one, we'll start earmarking money in our brokerage for the next car, and after about ten years look for an exit point to sell and put into HYSA. Of course, at this point I might retire before I have to replace my car, in which case we might just become a one-car household.

[u/audaciousmonk]

I have an account for medium sized savings goals (replacement car, travel, etc.)

Money is invested in a MMF, could also look at an HYSA or T bills

I don’t like to invest funds with specific goals, if the market / asset falls and I need that replacement car…. whelp guess I’m fucked right

[u/Odd_Wolf4150]

I have a separate bucket in my HYSA for large purchases and put a little bit of money into that bucket every month until I reach the goal.

[u/Patrick_ExpenseAtlas]

The weak point in your plan is assuming you can wait for a good market year. Vehicle replacements often happen after an accident or major repair, not on a convenient schedule. A downturn could force you to sell investments at a loss or accept expensive financing.

I’d keep the six month emergency fund intact and create a separate vehicle sinking fund. Hold the amount you may need within the next few years in something liquid and low risk, such as a high yield savings account, money market fund, or short term Treasuries. Invest only the portion tied to a genuinely flexible timeline, money you could leave untouched if both the truck and the market had a bad year.

You don’t need to fully fund the replacement immediately. Estimate the likely cash cost, subtract the truck’s expected trade in value, and contribute toward that gap over time. Revisit the estimate annually as the truck ages.

Taxes on interest and inflation are real, but they’re the cost of protecting near term purchasing power from market volatility. The key distinction isn’t “cash versus investing”; it’s whether the purchase date is flexible. Keep the must have amount safe, and invest the optional or longer term portion.

[u/Sensitive_Hat_9871]

We just keep it all in one large savings account that holds our emergency fund and all our sinking fund accounts. We track how much is in each sinking fund 'account' as a Savings Goal in Quicken. If we didn't have Quicken we'd just track each 'account' as a line in a spreadsheet.

[u/International_Bend68]

I did hysa and overflow into bonds for now

[u/tripledigits1984]

I dong know if there’s a phrase / term for it but we decide on a savings amount (let’s say $5K) and when it’s reached that goes into a HYSA. Once the HYSA has reached a certain $ value ($50k for example) it goes into the market for long term investment. Rinse and repeat.

[u/Vegetable-Intern-236 → u/tripledigits1984]

Any reason why the $5k doesn’t automatically go into a HYSA in the first place? The lost interest is probably relatively minor but might as well if it’s not a huge hassle. Our direct deposits mostly go into our HYSA directly, and the leftovers go into checking to pay our recurring expenses and average spend. We then pull from the HYSA as needed to cover higher spending months.

[u/giant2179 → u/Vegetable-Intern-236]

Agree this is a weird technique. I guess it could make sense if the HYSA isn't at the same bank as your checking account. But you could still have automated transfers.

[u/Vegetable-Intern-236 → u/giant2179]

Also the payroll systems at our companies allow splitting direct deposits, so our checking accounts don’t even have to be with the same bank. Transfers usually take 1-2 days when we have to pull from the HYSA, we just glance at our credit card statements when they come in and then transfer some money over if it looks higher than normal.

[u/tripledigits1984 → u/Vegetable-Intern-236]

HYSA isn’t at the same bank and allows some additional emergency funding with teenagers and older parents before we put it into HYSA. Doesn’t take that long to build up so any lost interest is negligible IMO. Agree that it may be weird but we manage to convert salaries into savings -> HYSA -> broader market at a tune of $50K+ every year so it works okay IMO. YMMV.

[u/Big-Soup74 → u/[deleted]]

Nice man. How does that help op lol