Here's Exactly How to Save for an Engagement Ring
Couples commonly wonder how to save for an engagement ring, especially as the national average hovers at around $6,000. According to The Knot Jewelry & Engagement Study, proposers explore 10 rings in-store, on average, before making the big purchase. It's an extensive process for most, requiring research, diligence and financial commitment.
When it comes to the actual payment method of this big purchase, couples wonder whether a credit card, loan or cash is the best form when considering how to save for an engagement ring. "You don't need to fall for social conventions of spending [a few] months' salary on an engagement ring, there are no real rules about how much money to spend. Budgeting for an engagement ring should be tailored to your own financial situation," says Digit personal finance expert, Snigdha Kumar. "But it's important to have a plan for how you will pay for the engagement ring. Consider saving for a few months in advance if you're ready to take the next step in your relationship."
Rules for How to Save for an Engagement Ring
Saving each crumb and building a nest, like ants, is the recommended approach when exploring how to save for an engagement ring. Like most big and cherished purchases in life, the ring similarly requires rationale over emotion. "It can be easy to get swept up in the excitement of buying an engagement ring. However, couples should work on having an upper limit on how much they will spend on the ring," explains Kumar. "This upper limit should be a function of how much income you make and what other large purchases you have in store. If you are paying for your own wedding and planning to buy a house together, take those expenses into account to decide on the price range for the engagement ring."
"Put a little money aside every month and keep control of your emotions," suggests Shari Greco Reiches, the founder of wealth management firm Rappaport Reiches Capital. "It is tempting, but don't exceed your established budget." Here are additional ground rules for how to save for an engagement ring seamlessly.
The majority of couples reach a consensus together about purchasing an engagement ring prior to the transaction. In fact, our study found that three out of four ring recipients had some type of involvement in selecting or purchasing the engagement ring (a 10% increase since 2015). Establishing intent to purchase is important because it encourages communication; plus, it's the first step in goal-setting.
Create a Deadline and Set Amount
"Do you have student loans? Do you have auto loans? Do you plan to buy a house soon? How much will you spend on your wedding?" asks Kumar. "Keeping a track of your upcoming expenses and walking backward from there should give you a better idea on how much to budget for that ring."
Jeweler Lindsey Scoggins of Lindsey Scoggins Studio suggests each couple talk through areas of importance, including the stone size, its quality, overall value and the shopping experience. "This will lead to how much an ideal ring would cost, which influences how much a couple is comfortable spending," she notes. "It's important to be honest about this last part since engagement rings are happy investments."
Find a Jeweler Who Meets Your Standards
"Everyone has different priorities when it comes to big purchases. Some people love a heritage brand that promises craft and quality and prestige. Others love getting bang for their buck and searching for the best acceptable quality for the best price," Scoggins says. "Keep in mind the same is true for jewelers. One brand will tell you the endless benefits of lab-grown diamonds and the other will tell you the enduring value of natural diamonds. Stay true to what's important to you. It's easiest to understand what you are buying, and how much you should be spending if you work with someone you trust."
Source Tools to Help With Savings
Saving money is a discipline that requires commitment. Some couples may find it challenging to store away a few dollars each day, while others have habitually wrapped saving into their lifestyle. For the former, there are unique apps that exist like Digit that stow away cash automatically via algorithms for those big life purchases. Couples can break down each "goal" in the app and designate a set amount (for a home, ring, wedding and honeymoon). "Let the app do the hard work for you," says Kumar.
Can You Buy an Engagement Ring on a Credit Card?
The main rule of thumb when purchasing an engagement ring on a credit card is paying it off, in full, before the statement due date. "You can buy an engagement ring by credit card, but only if you plan on paying it off entirely," confirms Reiches. "As a general rule, buying a ring on a credit card is safer than using cash. Using a credit card may provide certain legal rights that you don't get if using cash. However, I do not recommend going into debt to buy an engagement ring."
"If your plan is to pay back the ring [immediately] and you are just using your credit card to rack up points for your honeymoon travel, then go ahead and buy that ring on the credit card," says Kumar. "If the reason you want to put the ring on the credit card, however, is that you don't have enough saved up or you'll take time to pay it back, then consider waiting a few months. For example, you can buy a ring on a credit card, but make sure it doesn't max out your credit limit. Have a plan to pay the monthly installments and only use 40 to 50% of your credit limit to pay for the ring."
Though jewelers will profit when clients purchase engagement rings, Scoggins encourages practicing financial diligence and discipline while saving for a ring. This means cutting areas of debt, including credit cards, though transaction fees aren't necessarily beneficial to either party. "I do not advise couples to buy on credit of any kind unless they are a points junky and plan to pay the bill immediately," she says. "Diamonds make wonderful heirlooms but are not necessities, and therefore not a purchase worth going into debt for. Take time to save the cash and pay in full when you are ready."
Do Jewelers Accept Alternative Forms of Payment?
Off Scoggins' point, however: can you buy an engagement ring on credit card points or purchase a ring with cryptocurrency or via Venmo? Some individual sellers may accept various forms of payment, but in 2022, most national retailers and jewelers will accept traditional forms of currency. (That isn't to say things can evolve in the next decade.)
For now, per experts' previous suggestions: saving proactively with cash is a well-recommended option. That way, most couples can bypass additional transaction fees and avoid the burden of a cost-prohibitive purchase they should've avoided anyway.
Should I Take a Loan Out to Pay for the Ring?
Financial planners recommend against taking loans to pay for the ring. Instead, they encourage couples to set their savings goal and save proactively towards a reasonable amount that works within their budget. "I don't recommend taking a loan for the ring. If you do need to borrow money to buy the ring, make sure you have a plan to pay off the debt prior to the marriage," says Reiches, author of Maximize Your Return on Life. "Going into any marriage with debt can cause additional stress."
If a loan is considered, reading the fine print from understanding interest rates, payments schedules to other contractual obligations, is a must. "You have to know that you have the discipline to consistently make your payments," says Douglas Boneparth, president of Bona Fide Wealth. "If you don't have that discipline and you clearly don't understand the language or what the fees are or the basic concepts of borrowing, my rule would be not to borrow."
What Is the Best Way to Pay for an Engagement Ring?
It's up to the couple to ultimately decide the best payment method for an engagement ring, but a viable record of the transaction is incredibly important. "I recommend paying by check or by credit card if you plan on paying off the balance," says Reiches. "This way, you have a record of the purchase. If you pay by cash, make sure you receive appropriate documentation of the purchase."
"Nearly all of my clients pay via bank wire," says Scoggins. "This also eliminates transaction fees for the designer and helps us keep our costs down."
No matter how you decide to pay for a ring, stay within your budget and save towards that goal. "If you can't afford your 'dream' ring now, you can give a symbolic ring and buy the other ring when more money is saved," concludes Reiches. "Remember: the important thing to keep in mind is that you're starting your life with the one you love."