Why a wealth plan is a must before anyone walks down the aisle.
A child’s wedding day is a proud moment for parents. Their child is starting a new chapter in life, and most want to mark the occasion with the perfect ceremony and reception. Whether parents plan on paying for a child’s wedding entirely, or help financially, the cost of a wedding celebration can add up.
According to The Knot Real Weddings Study, the average cost of a wedding in the U.S. in 2022 was $30,000. But that cost can vary significantly depending on where the wedding is held, according to The Knot. For example, a Manhattan wedding might cost upwards of $60,000, while a wedding held in the Midwest might cost slightly more than $20,000.
Parents looking to pay, or at least assist in paying for the event, should start setting aside money well in advance, says Angie O’Leary, head of Wealth Planning at RBC Wealth Management–U.S.
“A wedding is a big ticket expenditure,” says O’Leary. “Parents want to ensure they understand how they are going to fund that wedding—and the impact it could have on their long-term wealth plan.”
For example, O’Leary says parents planning on using their investment assets will want to avoid taking out the funds at a time when the markets are down. This can mean setting aside the money in a separate investment account, with less risk, months or maybe even years in advance.
“We often recommend that people put the money aside in a separate account, like you would a college fund,” says O’Leary. “Prepare for it. Be ahead of it.”
O’Leary says some parents like to gift the money to their kids, and have them pay for the nuptials or use the money for other reasons, such as a down payment on a house; but they should be aware of the $17,000 per year, per person gift tax limit. Anything above that amount may subject the parents to gift-tax complications.
Couples can receive four, or even eight times, that amount since the $17,000 is per child per parent. In other words, gifts can be $68,000 per parent couple, or up to $136,000 if both sets of parents gift to each child. That’s enough to pay for the average wedding, even in in New York City.
If the wedding is going to cost even more, O’Leary recommends the gift money be spread over more than a year.
Some couples contribute their own money to the wedding, either to maintain some control of the event, or if the cost goes over the budget provided by parents. A study published by Brides magazine found 58 percent of couples either pay for or contribute to the cost of their nuptials.
“Since couples are investing their money, they have the freedom to spend it how they want without as much pressure from parents and traditions,” the report says.
This is especially true as couples get married later in life, when they’re more financially established, O’Leary says. Or, in some cases, parents may simply refuse to pay for certain costs, such as flying their child’s friends to Europe or an island for the big day.
“Setting expectations and limits is important when there are financial considerations,” says O’Leary. “Kids may have different priorities than their parents when it comes to their wedding. You need to figure that out before you start picking venues and placing orders.”
When budgeting for a wedding, whoever is paying needs to remember the extra costs, including tax on goods such as the cake, tuxedo and dresses, as well as the rental hall, caterer and bar.
“Sometimes there can be a little bit of a sticker shock when the final bill comes in,” says O’Leary.
O’Leary recommends using the services of a wedding planner who has experience sourcing and costing expenses for the big day.
“Having a wedding planner sounds silly to some people, but the fee can easily pay for itself several times over,” she says. “When you engage with someone who does this for a living—who knows the ins and outs—it just makes sense. Let them focus on costs and spending. That leaves you to focus on the overall budget.”
A wedding planner can also reduce stress from planning the event yourself, or relying on family or friends—who may have your best interests in mind, but not your tastes—to handle the details.
Too often, O’Leary says parents forget to mention to their financial advisors they plan on paying for their child’s nuptials, which means the best strategies to finance the event can get overlooked. Parents need to include that goal in their overall wealth plan.
It’s also the job of advisors to determine the potential future expense with their clients. “A good advisor is always going to bring it up with parents,” she says. “It’s a looming expense that you need to build into a plan, alongside paying for college or a down payment on a house.”
A good advisor will also help parents pull the money out of the right places, at the right time.
O’Leary says there are two places parents should never take money from to fund a child’s wedding—their home and assets intended to pay for retirement.
“There are a million ways to get married, but there’s only one way to retire,” she says.
With those tips in mind, parents can start to plan ahead for what can be one of the happiest days of their lives, and hopefully their child’s, too.
Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.
RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in consultation with your independent tax or legal advisor.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.
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