How much should I save each month?

Saving money is the foundation of financial success. By setting aside cash from each paycheck that you promise to not spend, you’re setting yourself up to eliminate the stress of stretching yourself too thin – or even worse, racking up credit card debt.

However, knowing exactly how much you should save can be tough. There’s no one-size-fits-all answer, either. You’ll need to think about how much you earn, how much you spend on essentials such as housing, commuting, childcare and debt repayments and why you’re saving in the first place.

How much should you save each month?

For many people, the 50/30/20 rule is a great way to split up monthly income. This budgeting rule states that you should allocate 50 percent of your monthly income for essentials (such as housing, groceries and gas), 30 percent for wants and 20 percent for savings.

How to decide what to save

There are general tips that relate to savings, whether it’s retirement or emergency savings, such as setting aside 20 percent of your income each month for savings. However, the amount of what to save each month is not a one-size-fits-all number and actually varies greatly depending on your personal situation.

“While I know everyone loves rules of thumb and easy tips, there isn’t a percentage that works across the board for everyone,” says Laura Davis, CFP and founder of Financial Labs Inc.

If saving 20 percent of your paycheck seems impossible right now, then save what you can. Just follow Davis’ simple one-word rule: “Start.”

It’s all about a habit. By setting aside a small amount – say $50 – each month, you’re training yourself to make saving part of your routine. And as you earn more money, you can increase that number.

If you are struggling to save 20 percent of your paycheck, consider ways to increase your income, such as a higher paying job or earning more money with a side gig. If your employer offers a 401(k) match program, this is a great way to increase your savings with “free” money. Create a budget and track your spending to analyze where your money is going. Find ways to save money on each category. If there are areas you can reduce your spending, you can put this extra money toward your savings.

In some cases, saving 20 percent may not be enough. Consider your income as well as your goals. After building your  emergency fund. if you want to do other things like take a trip around the world, retire early, pay for a wedding or child’s education or make a large purchase, you may need to save significantly more each pay period.

What should you save for?

Think about saving money like running a race: The competition is going to feel a lot better if you have an idea of which direction to head for the finish line. Of course, saving isn’t ever really “finished”; you’ll be constantly working toward different financial goals over the course of your life. Here’s a look at some of the most important reasons to set money aside:

• For unexpected, life-altering emergencies: If you’re just getting started on your savings journey, an emergency fund should be your first goal. This is the money that you have set aside to help cover expenses when something bad happens. (Notice the “when” – not “if” – in that sentence; bad things happen to everyone). It’s a cushion of money to cover your expenses for a while – typically three to six months – and helps prevent you from using a credit card or taking out a high-interest loan.
• For major life events: Buying a new house, getting married, having a baby – these are all exciting milestones, but they all come with a hefty price tag. How much you’ll need to save varies, but the lesson is simple: The more you have set aside, the more you can enjoy these new chapters in life.
• For the fun stuff: While you might already have a budget for entertainment and dining out each month, it makes sense to work toward saving up the money for bigger expenses that fall into the “wants” category. Take vacation, for example. If you want to go skiing next winter, start saving now. When the trip arrives and it’s paid for, you’ll have a much smoother time without the need to think about paying it off when you’re home.
• For college: If you have a young child right now, there’s plenty of uncertainty about what he or she might want to be when they grow up. However, if the plan includes college, there’s one undeniable truth: It’s going to be expensive. There are plenty of ways to start saving for college including a 529 plan and prepaid tuition plans.
• For retirement: The sooner you begin saving for retirement, the sooner you’ll be able to actually enjoy the post-work chapter of your life.  Plus, there are plenty of ways to save for retirement that come with tax benefits. How much you’ll need for retirement varies by your plans – you’ll need a lot more if you’re planning on having a second home and traveling the world – but don’t delay thinking about it.

Where to put your savings each month

In addition to thinking about how much you should be saving, you need to consider all your options for where you should be depositing the money. Different savings goals require different types of accounts. Here’s a rundown of three of the best places to stash your cash:

• High-yield savings account: Instead of accepting low – or no – interest from a standard savings account, a high-yield savings account does exactly what the name implies: Pays you a higher yield. The best high-yield savings accounts have low minimum deposit requirements (in some cases, it’s $0), and some are paying above 5% APY. You can access the money whenever you need it, so this is a great place for your emergency fund.

• Certificate of deposit (CD): CDs are a good fit for savings goals with a set deadline. For example, if you’re planning to start looking for a house 18 months from now, you might want to open a 1-year CD. You’ll get a guaranteed rate of return, and you’ll be able to calculate exactly how much you will have at maturity 12 months from today. Traditional CDs have early withdrawal penalties, which can actually work in your favor: Because you’ll have to forfeit some of your earnings, you’ll be less tempted to access the money.
• Individual Retirement Account: IRAs are a great option for your long-term retirement goals. These accounts can include a wide range of ways to grow your money – from high-risk stocks to low-risk CDs (CDs can struggle to keep up with inflation, so you’re going to need to get more aggressive for your retirement goals).

Ways to boost your savings

Once you have an idea of where things stand and what you can afford, you can begin to focus on how to save more each month:

• Track your spending: “Keep track and use an app to help monitor your spending,” says Chad Parks, CEO and founder of Ubiquity Retirement + Savings, a small-business retirement plan provider. “You will be surprised at how much you’re spending that would otherwise be saved.”
• Automate your savings: You can have retirement savings directly transferred from your paycheck, so you don’t ever have to see the money in your account. You can also set up automatic transfers from a checking account to a savings account to build your emergency fund.
• Look for round-up tools: Some banks offer a feature that links your debit card spending to your savings account. For example, if you buy a coffee that costs $4.55, a round-up tool will automatically transfer 45 cents from your checking account to your savings account.
• Conduct regular audits of your money: In addition to monthly spending trackers and small steps to save a bit more each week, it’s wise to take a big-picture look at your lifestyle and your expenses several times each year to identify whether you need to recalibrate your finances. At the end of the year, for example, look at your savings accounts. How much have they grown? What can you do to make the growth even bigger over the next 12 months?
• Regularly increase your savings: Once you establish a habit of saving, you can build in regular increases until you reach your goal, says Kevin Mahoney, CFP, founder and CEO of Illumint, a financial planning company. Additionally, make sure that the money is going where it will do the most good.
• Update savings after a major life event: Every time you change jobs, receive a salary increase or get a bonus, you should increase your savings. Mahoney recommends that savers set aside 50 percent of any “new” money in the form of a windfall like a bonus or tax refund for savings, either by putting it away for retirement or by putting it into emergency savings — or doing both. “If a child starting school reduces or eliminates child care payments, put some percentage of those newly available funds toward long-term savings,” Mahoney says.

Ready to start focusing on saving more money? Use Bankrate’s Simple Savings Calculator to figure out how long it will take you to reach your next financial goal.

–Bankrate editor Kristen Kuchar contributed to updating this article.