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How to save for an engagement ring
Find a short-term savings account with a high APY once you’re ready to start saving for the proposal.
If you’re ready to pop the question, consider how much you can afford, and the kind of ring your partner expects. Then, follow these four steps to save for the perfect engagement ring:
1. Set a budget
The amount you spend on an engagement ring will depend on a number of factors like your income, expenses, debts and partner’s expectations. Set a realistic budget that you can afford.
Here are three tips for trimming expenses from your budget:
- Save unexpected cash. If you receive a bonus, pay off a debt or cancel a bill, consider rerouting that money into your savings account.
- Cut back. During the months leading up to the purchase of the ring, you can cut back on vacations, dining out or other major expenses to free up extra cash.
- Use the $5 bill method. Each time you pay for something in cash and receive a $5 bill back in change, stash it away for your engagement ring. You might be surprised how much you could save this way.
2. Pick a ring
Research the kinds of rings you can afford. You don’t need to visit a jeweler to do this, as there are plenty of online sites that can give you an idea of what you can get.
While you’re comparing your options, decide whether you’ll get ring insurance. On average, ring insurance costs $1 to $2 for every $100 it’d cost to replace the ring, according to The Knot. So, if you bought a $3,000 engagement ring, expect to pay anywhere from $30 to $60 a year to insure it.
3. Open an account
The sooner you start saving, the better. Whether you’re just starting out or have some money saved, set up a dedicated savings account and contribute to it whenever you can. Look for a savings account with low fees, a high interest rate and convenient ways to access your money when you’re ready to buy the ring.
If your partner wants to contribute to the cost of the engagement ring, consider opening a joint savings account. You can keep the ring a secret, but you can both contribute to reach your goal sooner.
4. Make regular contributions
Determine how much you need to put away monthly to reach your goal and set up automatic deposits. Consider these contributions like a bill and roll this payment into your budget so that you don’t miss a month and fall behind on your plan.
Find a roundup app or keep-the-change program to save even more to make consistent progress toward your goal with your extra money. If you receive a bonus, pay off a debt or cancel a bill, consider rerouting that money into your savings account.
How much should I save for an engagement ring?
Have a conversation with your partner about expectations for an engagement ring before you get started. Diamond rings can cost an average of $5,900, according to The Knot’s 2019 Real Weddings Study. But not everyone has their heart set on a diamond. Other popular rocks include amethyst, turquoise and sapphire, which can cost significantly less.
It’s likely that you’ll spend more than $1,000 on an engagement ring, no matter what you choose. But when you add a 14-karat gold band, special settings and personal touches, you can spend more than the $5,000 on average. If you can avoid financing a ring, you’ll end up paying less in the long run.
Types of accounts to save for an engagement ring
The best account for a short-term savings goal is one that offers a high APY, little fees and little access to your money. Consider these types of accounts:
Traditional savings accounts
These accounts usually pay between 0.01% and 2.5% APY on your balance. It’s usually easy to set up direct deposits and they can have low balance requirements and low monthly fees. Plus, they’re limited to six withdrawals per month to encourage you to keep saving.
Money market accounts
Similar to traditional savings accounts, money market accounts pay between 0.08% to 2.35% APY. However, they often have higher balance requirements, meaning you’ll need to have a chunk saved up before opening. Some of these accounts may give you more access to your money with checks and debit cards.
Compare accounts to help you save for an engagement ring
How to compare accounts for an engagement ring
With so many types of accounts that can help you save for an engagement ring, it’s important to know how to compare them. Consider these factors as you look for an account:
- Fees. Some accounts come with monthly fees, but usually if you meet certain requirements you can avoid them.
- APY. Interest rates will make a difference in the total amount you can save. Find an account that has the highest APY at a balance threshold you can afford.
- Access. If you have too much access to your savings account, you may struggle to save the total amount you planned.
- Bonuses. You might get lucky with an account that offers a sign-up bonus or rewards program that gives you cash right off the bat.
- Eligibility. Be sure to look out for eligibility requirements, fee waiver conditions and other details.
The amount you spend on an engagement ring depends on your financial situation and the ring you and your partner decide on. Once you choose your ring and decide how much you want to spend, compare the best savings accounts to find an option that’s right for your situation.
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