Most first-time earners wonder how much they need to save to build a financially secure future. Although this is a common question, the answer varies from person to person due to the unique nature of our individual financial goals. From buying a car to funding your children’s education, goals vary, and so does the amount you need to save. In this article, we cover how much you need to save to achieve your goals and live comfortably. 

• How much you need to save depends on your financial goals, income, and expenses.
• Experts suggest allocating at least 20% of your monthly income to savings.
• You can hold your savings corpus in high-yield savings accounts or FDs to earn returns. 

Estimating how much you need to save every month depends entirely on your savings goals. We generally tend to save with specific goals in mind. For instance, you may be saving to buy a new phone, plan a trip, or build a retirement corpus. Each of these goals has a different timeline and target amount. Your savings and investment approaches must be well-aligned to achieve these goals.

Understanding your financial goals helps estimate how much you need to save in the following ways:

• You assign a target amount to each goal, helping you understand how much you need to save periodically to achieve the target amount.
• You determine when you want to achieve the goal—whether within a couple of years or a decade - to draft a systematic savings plan for the goal.
• Based on the goal’s timeline and your general comfort with investment risk, you can estimate the amount of risk you can tolerate to achieve it.

You must also remember that your savings target will depend on your age, monthly income, liabilities, and debts. When determining how much to save, you must consider these factors as well. If you are looking for a safe investment option, you can consider fixed deposit. They offer guaranteed returns and a fixed interest rate throughout your investment tenure.

Allocating a portion of your income to savings is a good way to begin your journey. Most beginners use the following thumb rules to decide how much they need to save monthly:

• The 50-30-20 rule
  According to the 50-30-20 rule, you dedicate 50% of your income to fixed expenses like rent, utilities, and groceries. 30% goes towards your discretionary spends, like dining out, while the remaining 20% is allocated to your savings fund.
• The 80-20 rule
  The provisions of the 80-20 budgeting method dictate that you allocate 20% of your income to savings the moment you receive your paycheck. The remaining 80% is allocated to your monthly expenses—both fixed and discretionary.
• The 75-25 rule
  Lastly, the 75-25 rule suggests saving more than the basic 20% limit. According to this thumb rule, you should allocate 25% of your monthly income to savings, using the remaining 75% to finance your expenses, pay EMIs, and spend on wants. 

Now that you can determine how much you need to save every month, you must understand where to save these funds. Here’s a list of saving avenues you can consider:

• High-yield savings accounts: High-yield savings accounts are ideal for those looking to earn more from their idle funds. High-yield deposits generally earn an interest rate of 6%-7%, while money sitting in your regular savings accounts earns a low interest rate of around 2.5%-3%. Plus, you have the liquidity benefit of accessing funds whenever needed.
• Fixed deposit: FDs offer a great avenue to invest your saved corpus for specific and time-bound goals. Apart from perks like risk-free guaranteed returns and high yields averaging around 8%, FDs offer flexible tenures ranging from 7 days to 10 years. This makes them versatile investment options for different goals with varying timelines.  You can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.60% p.a.
• Mutual funds: You can also consider putting your saved corpus into mutual fund schemes. There are different types of MFs available for different financial goals. For instance, you can invest your emergency fund in liquid funds, while for short-term goals, you can pick ultra-short-term debt funds. For long-term ones, you can choose equity MFs. But remember that mutual funds are market-linked and carry a higher investment risk than traditional instruments like FDs and RDs. The returns from your MF investment entirely depend on the fund’s performance and market conditions. Always review your financial goal and risk appetite before selecting an MF scheme.

In a nutshell, how much you need to save depends on your financial goals, income, and expenses. While you can rely on a few thumb rules for savings, it’s best to tailor your savings strategy according to your specific requirements. Apart from savings, it's also important to choose investment options that best align with the timeline of your financial targets.