Organizing a wedding has never been easy. But anyone trying to do so over the past two years has faced a host of new challenges. Venue closures, travel restrictions and wary guests are just a few hurdles they’ve had to overcome.
Yet, as unique as the past few years may have been, there’s one marriage constant that hasn’t changed at all:
They are not cheap.
According to The Knot, the average cost of a wedding in 2021 was $34,000, with most of those costs ($28,000) going to the ceremony and reception. This is already in line with pre-pandemic spending levels.
And the news isn’t getting any better.
According to WeddingWire, 74% of couples over budget for their wedding – and the average couple under budget what they will spend by up to 45%.
Are you ready for more? In the 2021 Brides and Investopedia Marriage Survey, 9 in 10 respondents said they put off at least one major financial priority — like saving for a home, starting a family, or saving for retirement — in order to pay for their wedding.
At a time when wedding planners are reporting skyrocketing prices for food, rentals and venues, it’s worth considering how couples and their families can prepare to manage the expenses.
First of all, who pays?
These days, more and more couples are paying for their weddings with their own savings instead of asking family for help. But as the numbers above show, it’s quite an investment.
Most couples start saving for their wedding once they get engaged. But more often than not, they also struggle with other financial constraints such as saving for a house or paying off credit card debt.
This helps explain why most engaged couples still go the traditional route and rely on family for help.
No matter who ends up signing the checks, it all comes down to two key factors: where to save and how much.
where to save
At CapWealth, clients often ask us when they should start saving for their child’s wedding. The obvious answer is as soon as you can, and a UTMA (Uniform Transfer to Minor’s Account) is an ideal way to do that.
UTMA allows minors to receive gifts and avoid tax consequences until they reach legal age in their state, at which time the money or gifts legally become theirs. (In Tennessee, that’s when they turn 21.) It offers kids an easy way to save and invest without the tax burden that comes with it. For 2022, the IRS provides a gift tax exclusion on qualifying gifts up to $16,000 per person.
We often see parents using UTMAs to help their children save for things outside of education. It could be a car, a down payment on a house, or, for our purposes here, a wedding. A key benefit is the fact that it gives parents plenty of time to save slowly.
If you and your partner are saving for yourself, an individual or joint investment account is usually the best solution. But it also depends on your schedule. And remember that there is always a risk in investing money, especially in the short term, as we have seen in recent months.
If you’re on a tight time frame – 2 years or less – you probably don’t want to invest the money at all. If current market conditions are any indication, volatility can work against you when you need money on a relatively short-term basis. This makes a CD or other short-term cash equivalents a safer bet.
How much to save
The basic concept is the same as with any other budget approach – take your targeted wedding budget and divide it by the number of months you need to save. If you need $28,000 and have two years, you need to save a little over $1,000 per month. ($1,166.67, to be exact.)
If you are longer – say 21, in the case of parents using a UTMA – you would only need to save $52 per month to save $28,000 (assuming a 7% annual return over 21 years) .
Remember to keep your target budget realistic. If you think you can’t reach your savings number consistently, you have two choices. Bring your wedding plans (and your budget) down to a more reasonable level, or delay the wedding to create a longer time frame in which to save.
These choices can be difficult to make. But they are vitally necessary. There are ongoing costs that come into a marriage – many of which are unforeseen. It is therefore important to plan ahead and save. Otherwise, you and your family could face very unpleasant financial repercussions that can linger for years.
Jennifer Pagliara, CFP, CTFA, is Executive Vice President and Financial Advisor at CapWealth. For more information, visit capwealthgroup.com.