Space needed forTime machine?

The old standard was that the Time Machine drive should be 2.5 - 3 times the size of the internal Mac drive. Thumb drives are slower than the second coming for Time Machine backups or restores and you would be advised to use an external SSD as large and as fast as you can afford, or if larger than 2GB, a 7200-rpm 3.5 inch drive in an external enclosure to keep the larger drive expense down.

For my 2021 16-in MacBook Pro M1 Pro with an internal 1TB drive, I am using a 2TB 1050MB/sec Crucial X8 drive (via USB-C gen 2 cable) for the Time Machine backups. Only because they don't make a 4GB drive in this model.

At least as much data as you have on your MacBook Pro. I would suggest your Time Machine Drive should be twice the amount of data your MBP can hold.

I wouldn't use a thumb drive.

Use any inexpensive USB-connected external hard disk drive, and ideally more than just one. Speed is not important for Time Machine; redundancy is.

I would also recommend using a good quality external drive; some thumb drives are not reliable for long term storage.

Question: most of the time, it is suggested that an SSD for TM is an overkill as the speed is not needed while doing its work in the background?