What is the term for setting aside money for a purchase while letting interest accumulate in your favor?

The term for setting aside money for a specific purchase while allowing interest to accumulate is referred to as a sinking fund. A sinking fund is a strategic savings approach in which an individual regularly deposits funds into a designated account specifically earmarked for a future expense, such as a vacation, home repair, or major purchase. These funds can accrue interest over time, thereby increasing the amount available when the purchase is ultimately made.

In contrast, a savings account is a more general tool for storing money and earning interest, but it does not necessarily involve the specific intention of saving for a defined expense. A budgeting plan refers to the overall strategy of managing income and expenses, rather than the act of saving for a particular goal. Expense tracking focuses on monitoring and recording spending habits, which is useful for understanding financial behavior but does not imply saving for future purchases. Thus, the sinking fund is the most precise term that captures the essence of setting aside money with an intention and benefit of earning interest for a future purchase.