How much money should you save? This is one of the most important questions, but determining the answer is challenging in most situations. Saving enough is often the primary concern for many people, and you want to be sure you tuck away enough money to meet your financial obligations for some time.

There’s no limit to how much you can save, but at some point, you’ll also want to start spending your money to live the life you want. So, then, the question is, how much do you need to save?

That’s really dependent on many factors. For example, how long do you have to reach your goal? If you want to retire in three years, you’ll need to be far more aggressive about putting money into your savings than if you had 15 years to continue to save. You also want to consider how you invest and how much your savings will grow throughout your lifetime.

There’s a lot to think about here. Let’s break down some insight into various categories people often save for to provide some perspective on how much you may need.

Retirement Savings

Saving for retirement is often your most significant challenge. You want to put enough money away so you can stop working. Consider what life during your retirement would be like. How much money do you think you’ll need to have to live the life you want? If you plan to stay close to home, you’ll need less than if you plan to be a world traveler, for example.

Here are a few key things to consider:

• You have more time to save when you are younger. If you’re in your 20s, aim to save 10% to 15% of your income for retirement.
• Once you reach your 30s to 40s, you need to increase your savings. Aim for about 15% to 20% of your income towards retirement goals.
• Those entering their 40s may need to be more aggressive, especially if they haven’t saved much money. That’s why at this age, saving 25% to 35% of your income is beneficial.

Here is the trick with this type of long-term savings plan, though. If you start to save money for retirement in your 20s, you will likely not need to increase how much you save by more than 15% throughout your lifetime. If you start in your 30s, you may not have to expand beyond 20% for your life because of the value of time.

Emergency Savings

Other savings goals exist too, and they don’t always have the luxury of time. That includes your emergency savings. Most of the time, you should aim to build an emergency savings account as quickly as possible. That should start with $1,000. Then, move on to 3 to 6 months of your monthly expenses.

To meet this goal, consider aiming for a year or so. How much do you need to put into savings to reach your goal of having six months’ worth of expenses in savings? Divide the amount you need to save by the amount you can save each month.

Everything Else

There’s likely much more for you to consider saving for, too. Some of the other potential goals you may have include the following:

• College education for your child: You may have 10 or more years to put these funds aside for your child.
• Down payment on a home: The amount you save here should be at least 3% but up to 20% of the purchase price of the home you want to buy. The length of time depends on how much you can save and when you want to move.
• Buying a car: How long will your current car last? What type of new car do you want to buy?
• Travel: Many people save money consistently to help pay for their travel. This could be one of the savings accounts you use throughout your lifetime. Reach a goal, take a trip, and then start over again.
• Starting a business: If you want to start a business, determine when you want to do that and how much money you can put into savings for it each month.

Calculating Your Savings Rate

Determining your rate of return on savings is one of the most complex parts of this process. That is the amount of money you are likely to earn from the money you put into savings. Remember, if you invest in retirement early on in your life, you’ll put less of your salary and paycheck into your retirement account each month. That’s because there’s more time for your savings to grow based on interest.

Here are some steps to consider to understand your savings rate:

• Determine the amount of money you want to save. Make it a dollar figure that fits your situation.
• Determine how much money you can put into savings right now as immediate savings funding.
• Consider the growth over time. How much time do you have for the money to remain in savings to go?
• Estimate the interest rate. This is where things can be difficult because you could be using various strategies. You can use a savings calculator to gain some help here. You’ll want to choose the interest rate based on past interest rates or any guaranteed rate of return you may have.
• Compound it. This is another area where a savings calculator helps. Interest rates add value to the amount you put into your account and the amount you earn each month, quarter, or year.

Consider a few different strategies and research the average interest on various types of investments, like retirement savings, stocks, bonds, and mutual funds. It’s a good idea to consider multiple strategies to help you achieve your goals and provide financial stability.