Think long and hard before you decide to spend two-months salary on an engagement ring.
First, in the interest of full disclosure, I have beautiful wedding rings and I wouldn't trade them for the world. I happen to love diamonds, but the fact is they are expensive.
As 13 million people prepare to propose this month, the experts at Lendful Financial are encouraging them to pause and consider the price of the engagement rings. In particular, they are hoping these future fiancees will question the tradition of spending two months salary on a symbolic band. According to the CEO Alex Benjamin, "we're seeing historic unemployment and underemployment," particularly among millennials who are of marrying age. People get so caught up in a wedding, they neglect to plan for their financial futures. It really should be the other way around: get the overall strategy right first, then agree on what you can afford to spend on these life events."
The two months salary benchmark is nothing more than a marketing campaign from the 1940s that enabled De Beers to position the price of a diamond ring as a percentage of income rather than a dollar value. The initiative solidified diamonds as the symbol of eternal romance and there has been steady demand ever since.
So back to the cost of a ring. A typical engagement ring will cost over $15,000 if you have to borrow for it. This based on the average Canadian salary of $49,000 annually, a typical ring would cost $8,320. If the money is borrowed on a credit card with an interest rate of 17 per cent and only minimum payments made, it would take over 15 years to pay off and cost $7,000 in interest. Conversely, if you took $8,000 and invested at five per cent interest it would appreciate to over $10,210 in just five years.
Moral of the story: think long and hard about what you could do with that money as a future couple and what it could mean to your long-term financial goals. I'm not saying don't get married and don't buy a ring. All I'm saying is understand the costs and budget accordingly.
CTV's Chief Financial Commentator Pattie Lovett-Reid offers a financial tip of the day during the month of February for Your Money Month.