How much should I save each month or paycheck?

While the recommended savings target is around 20% of your take-home pay each month, the right number depends on several factors, including your age, current earnings, debt burden and long-term goals.

Ideally, your savings should just be one aspect of your overall financial picture, rather than an isolated monthly calculation. Here's how to build a monthly savings habit that fits your life and evolves over time.

Use savings benchmarks as a starting point, not a rule

Financial experts often recommend the 50/30/20 rule for budgeting, where 50% of your income goes to necessary spending, 30% to discretionary expenses and 20% to savings.

For example, if you earn $4,000 in monthly take-home pay, 20% equals an $800 savings target, leaving $3,200 to cover housing, utilities and discretionary expenses. If your income is closer to $2,500, 20% equals $500, leaving $2,000 for monthly spending.

In reality, these guidelines don't account for high-cost-of-living areas or variable earnings, which may require alternative savings strategies. Saving while paying off debt can also shift your financial priorities. In these cases, a 20% savings target may not be achievable based on your particular situation.

When deciding on a savings and budgeting strategy, use benchmarks as a jumping-off point to set a manageable savings percentage that's balanced with your income and monthly expenses.

You may be wondering, "Is saving 10% of my paycheck enough?" Or, "Is $500 a month OK?" Depending on your income and goals, either of these scenarios may be exactly what you need. Even $10 per week builds $520 in emergency funds over one year. When that feels manageable, test out a small increase or add another 1% per quarter.

What matters most is that you're saving something. And it's important to remember that savings strategies don't have to be perfect. They're most effective when they're consistent and aligned with your day-to-day financial needs. Start small with the goal of increasing savings over time.

Your savings goals determine the right percentage

Having a goal in mind gives you motivation to save. If you're planning a large purchase, consider a pay yourself first budget strategy and calculate how much you'll need to hit your goal.

Some example savings goals include:

• Emergency funds: This should be one of your highest priority short-term savings goals. Building an emergency fund requires short-term intensity, but once you reach this target, you can redirect your money toward other goals.
• Retirement savings: If possible, saving for retirement in your 20s helps you avoid having to set aside a higher percentage of income later in your career. Contributing to your 401(k) account also allows you to take advantage of any employer matching benefit.
• Home purchase: If you're planning to save for and buy a home in the near future, you may want to temporarily increase your savings above 20%. In addition to a down payment, you'll need to cover closing costs, home insurance and possibly the purchase of home furnishings.

Once you've outlined your goals, you can figure out your personal savings rate to determine exactly what percentage of your monthly income you should be directing to savings.

How to calculate your personal savings rate

Your personal savings rate is based on how much money you bring in, your expenses and your short-term and long-term savings goals. Follow these steps to calculate a personalized savings target:

1. Calculate your take-home pay. Determine your net income after taxes and deductions.
2. Map your fixed and variable expenses. Identify what's non-negotiable (rent, utilities, minimum debt payments) and what's flexible (dining, subscriptions, discretionary spending).
3. Name your savings goals. Prioritize your list, beginning with an emergency fund and retirement contributions, followed by short-, medium- and long-term goals. These can be anything from wedding expenses to starting a business or saving for your child's education.
4. Assign a dollar amount to each goal. Break each goal into a monthly or per-paycheck contribution. For example, setting a goal for a $3,000 emergency fund in 18 months requires saving roughly $166 per month.
5. Determine your savings rate. Combine all your savings goals to arrive at your targeted monthly savings as a percentage of your net income.
6. Automate savings. Send a portion of your paycheck directly to a savings account using a direct deposit split or use automatic transfers from checking to savings. Track your budget through online banking and sweep extra funds into a virtual cookie jar at the end of the month by transferring them out of your checking account into savings.

Should I pay off debt or build savings first?

Debt payments sometimes take priority over savings. Rolling over high-rate credit card balances each month can wipe out any benefit you'd receive by increasing your savings.

Compare how much interest you're paying versus what you're earning in your savings account. Sometimes, depending on your interest rates, paying down high-rate debt can come close to what you may earn as a return on your savings.

Personalize your savings benchmark

When determining a savings percentage, it's important to do so within the confines of a smartly-crafted monthly budget that takes income, expenses and your personal situation and goals into account.

Need help with your savings goals? Explore Citizens savings accounts and tools, and choose an account option that works best for you.