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updated 9/20/2012 7:17:23 AM ET 2012-09-20T11:17:23

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If you're like most people, you work toward several financial goals simultaneously, yet you keep all your money clumped into a single savings account. But this approach can have some drawbacks. Among them, a single account makes it difficult to track how much is earmarked for each particular purpose, or whether it might make sense at any time to "plunder" the savings for one goal in favor of another.

That's why I started a targeted saving plan. With an online high-yield savings account (such as those listed at MoneyRates.com ), I've split my money into several subaccounts, each named for a specific savings goal. Mine include:

  • An emergency fund, there to bail me out in case of personal or financial catastrophe.
     
  • A car fund, not for maintaining my current car, but where I make an imaginary payment to myself each month for my next one. (I've been eyeing a Mini Cooper.)
     
  • A travel fund, where I save money to support my wanderlust. Any spare cash I have at the end of the month goes here.

Any time I have a new financial goal, I open an additional, targeted account. For me it is a powerful motivator. Because each account has a name and specific purpose, I have an added incentive to pay into it. I'm much more motivated to set aside money designated for a specific vacation than I am to save it for placement into a plain-vanilla savings account.

Targeted accounts also make it easier for me to visualize my progress. When my money is lumped into a single account, it's tough to know how much more I need to reach a particular goal. But when I look at my statement and see the total in the "Mini Cooper fund," I know exactly how much is required before those wheels are mine.

Finally, targeted accounts help me to prioritize. For instance, last year, when a trip to Africa was all I could think about, I held off putting money in my car fund and pumped every spare cent into the travel fund. I use an online bank for my targeted savings accounts, but there are other options. Previously I kept my savings at a community credit union. Despite their small size, credit unions offer big benefits, including the ability to open several named savings accounts. And, no, I'm not ashamed to admit that my first targeted account in 2006 was the "Nintendo Wii fund." 

 

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Data: Latest rates in the US

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Home equity type Today +/- Chart
$30K HELOC FICO 4.94%
$30K home equity loan FICO 5.19%
$75K home equity loan FICO 4.58%
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Low Interest Cards 13.40%
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