“How to Afford Your Child’s Dream Wedding”

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Factors to Consider

Your child is getting married, and the whole family is thrilled. But with the average cost of a wedding ringing in at $30,000 in 2022, according to wedding planning site The Knot, you may be a bit worried about your bank account too. While you may feel obligated to pay for at least part of your child’s wedding, there are several factors to consider before making the decision, including your other financial responsibilities, family expectations, and ways to reduce wedding expenses.

Your Finances

Assess your financial resources and obligations, including:

• Debts: Is your house paid off? Do you have credit card debt, car payments, or any other outstanding loans? If you are paying off debts, do you still have enough wiggle room in your monthly budget to take on another financial responsibility?
• Assets: Do you have an emergency fund sufficient to finance three to six months of essential expenses? Are you fully funding your retirement account? (Your child can take out a loan to pay for a wedding, but you can’t borrow money to finance retirement.)

Your Family

Is the bride or groom your only child, or are there siblings whose college educations or weddings you may need or want to pay for? If this is the first child in the family to wed, paying for their wedding will set a precedent.

Your Wishes

Whether or not you can afford it without going into debt, is paying for your child’s wedding something you really want to do? If the “child” is an established, successful adult, financing their own nuptials can ensure they have skin in the game. Or perhaps you’re happy to pay for part of the wedding, as long as your future in-laws do the same.

Your Child’s Expectations

Have an honest discussion with your child to get everyone on the same page. Find out how they envision the wedding and what type of financial contribution they expect from you and the in-laws. You may need to encourage your child to prioritize and scale back on certain elements of the wedding to stay within your financial limits.

5 Ways to Pay for a Wedding

If you decide to contribute to your child’s wedding, there are several options.

1. Use Savings

You may already have enough savings to chip in for the wedding. Depending on the wedding date, you might have time to start a sinking fund dedicated to saving for the wedding. Investigate high-yield savings accounts, which generally offer better returns than standard accounts.

2. Take Out a Personal Loan

Personal loans can be used for any purpose and generally don’t require collateral. You’ll receive a lump sum and pay it back over time, typically a few months to several years. Personal loan interest rates may be fixed or variable but are usually lower than those of credit cards. Be sure to consider loan origination fees when assessing the cost of a personal loan.

3. Get a Home Equity Loan

A home equity loan uses the equity in your home as collateral, typically allowing you to borrow 75% to 85% of your equity. Since the loan is secured, interest rates may be lower than those for credit cards or personal loans. Home equity loans can have terms up to 30 years and typically have fixed interest rates, which means predictable monthly payments that are easier to budget for. On the downside, your home could be at risk if you can’t pay back the loan.

4. Get a Home Equity Line of Credit

A home equity line of credit (HELOC) also uses your home equity as collateral but works more like a credit card than a home loan. You can typically get a line of credit between 60% and 85% of your equity, make purchases up to your credit limit, and re-use the credit line as you pay down your balance.

During the draw period (typically 10 years), you generally pay only interest on the amount you’ve borrowed. After that, you usually have 20 years to pay off the balance or refinance the loan. Most HELOCs have variable interest rates, so your payments may change, and some have a balloon payment that requires paying the full loan back all at once. HELOCs offer the flexibility to borrow only what you need. But repaying the loan after the draw could be a challenge if your finances have changed—and defaulting on the loan could cost you your home.

5. Use Credit Cards

Depending on your child’s wedding budget and your credit limits, credit cards can be a good way to cover part or all of the wedding expenses. A rewards credit card could also earn you miles or points that help offset your wedding costs, such as airfare or hotel stays if the event is out of town. Using a credit card gives you the right to dispute charges if a product or service doesn’t deliver what was promised (for example, the wedding cake is a no-show but you were charged). Some cards also have purchase protection to replace products that are stolen, lost, or damaged within a certain time.

The annual percentage rate (APR) on credit cards is typically higher than a loan’s APR. If you have good credit, consider applying for a 0% introductory APR credit card that charges no interest on purchases for a set period. Use the card to cover wedding expenses, repay the balance before the promotional period ends, and you’ll pay no interest.

How to Save Money on Wedding Costs

Looking for ways to cut the cost of your child’s wedding? Here are some options.

• Choose an off-peak wedding date, day, or time. Summer and fall, Saturdays, and evenings are the most popular for weddings, according to The Knot.
• Hold the ceremony and reception in one location to reduce venue, decor, and transportation costs.
• Utilize family-owned locations such as homes or backyards. (Be sure to take the cost of renting tables, chairs, tents, and other accessories into account.)
• Serve buffet-style food instead of a plated meal, host a cash bar instead of an open bar, opt for a liquor-free wedding, or serve beer and wine only to save on food and beverage costs.
• Send digital instead of paper invitations to save on paper and postage.
• Eliminate wedding favors—in addition to being more affordable, doing without items that are often discarded is more sustainable. According to The Knot, more than half of couples skipped favors in 2022.
• Shorten the guest list. Reducing the number of guests reduces the number of tables, chairs, meals, and beverages you’ll need.
• Rent the wedding dress or purchase a pre-owned one.
• Hire a DJ or create a playlist instead of hiring a band.
• Have a student photographer or a friend with photography skills handle video recording and photography.

Alternatives to Paying for the Entire Wedding

Is covering all the costs of your child’s wedding beyond your budget? You’re not alone. Most couples shoulder almost half of their wedding costs, The Knot reports. Here are some alternatives.

• Offer to pay for specific aspects of the wedding, such as flowers, photography, catering, or the rehearsal dinner. You may want to set a budget or price range for this.
• Suggest paying for the honeymoon instead of the wedding (again, you should specify a budget).
• Contribute an amount you can afford without going into debt, and have your child (and perhaps the future in-laws) cover the rest.
• Give a financial gift the couple can use for any purpose—the wedding, the honeymoon, or a down payment on a house.
• Suggest a longer engagement so both you and the couple have more time to save up for the wedding.

Living Happily Ever After

Paying for your child’s wedding is a big commitment, so consider it carefully and make sure you can afford the expense without creating long-term financial stress. If you decide to apply for a loan, line of credit, or new credit card to help pay for your child’s wedding, check your credit report and credit score first. Experian’s comparison tool shows you personal loans and credit cards based on your credit profile, so you can apply with greater confidence that you’ll qualify for credit. Making the right decision for your family and your finances can help you enjoy the big day worry-free.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you make the best financial decisions for your family.

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