It is common today for couples to pay for their own weddings, but if you're a parent who plans to contribute to your child's wedding day, here are some steps you can take to ease the budget stress and balance wedding dreams with realities.
Wedding costs have been increasing since the economic downturn of 2008. In 2014, the average cost of a wedding reached a record high of $31,213, according to a frequently cited survey from TheKnot.com.1 However, the median is estimated to be less than that; for example, based off of that survey in 2012, the median was figured to be about $18,000 when the average price of a wedding was estimated to be $27,427.2 Regardless, these statistics may be daunting and may not be in line with what you plan to spend. No matter what your budget is, some advance planning can ease the pressure, so when your son or daughter says, "I’m getting married!" you can enjoy the experience without worrying about money.
Once your child becomes engaged, have an honest conversation with the couple about how to budget for the wedding. Discuss their expectations and give them a more specific idea of what you can contribute. Decide if you will be paying for specific expenses or offering a lump sum for the couple to use as they wish.
Also check in with any other family members who may be contributing to the wedding budget and agree on a preliminary amount of money you think is appropriate. Make sure your kids know about your plans. That way there won’t be any misunderstandings.
Assuming the big day is no more than a few years away, consider vehicles that will protect your savings while providing some growth potential. For example, money market savings accounts tend to earn higher-interest rates than regular savings accounts. And Bank of America Preferred Rewards members may have access to a Rewards Money Market Savings account interest rate booster. A savings account, unlike an investment account, is FDIC insured and is not exposed to the risk that it could lose value with stock market fluctuations. Consider your timing before choosing to save in a certificate of deposit that may change penalties for early withdrawals. Savings accounts allow withdrawals at any time, though subject to limits, and some types of certificates of deposit allow limited early withdrawals.
Offer to help the couple make a wedding budget. Explain that setting a limit on how much can be spent on each item will keep the costs from creeping beyond what you and they can afford — and help them prioritize what’s important. It can also be helpful to work with the couple to consider all categories, large and small, so there are few unexpected surprises heading into the big day.
You can hold a beautiful, memorable wedding and still find places to save. For example, renting a venue for any day other than Saturday is often less expensive. The same goes for finding venues outside of metropolitan areas. The average cost of a wedding in a major metropolitan area such as Chicago or Houston can run over $30,000, while areas in rural Utah and Ohio can cost half as much or less according to a TheKnot.com survey.
Resist the urge to dip into your retirement savings to help your son or daughter pay for their wedding. Not only will you likely incur an additional tax from an early distribution, but you’ll also lose out on the interest and earnings that money could accrue.
Planning and budgeting for a wedding in the family can allow you to celebrate this joyous occasion without worrying about your bank account balance. Take the time now to think about how you’ll contribute, and then move forward with confidence.