A conversation in the comments for the post Who Gets the Ring when an Engagement is Called Off? over at Free Money Finance raised the question from a commenter asking: How much should you spend on an engagement ring? 
I think the most important thing is to spend an amount that is within your means. Look at your income and your savings and decide on an amount to spend that won't put you in debt or stretch your budget. If you can't pay for the ring out of pocket with cash then consider saving up for a while so that you can buy it without a loan.
The rule of thumb that I've heard is that you should spend 2 months of salary for an engagement ring. Making the value proportional to your income seems like a pretty good way to decide how much to spend, but why 2 months and not 1 month? While searching on this question I found that Get Rich Slowly wrote about the topic last year: Ask the Readers: How Much Should I Spend on an Engagement Ring? JD voiced the same opinion I have that the 2 month rule is probably an invention of the marketing and sales staff of the diamond industry. Don't let this "rule" push you into spending more than you can actually afford or make you think that you have to spend 2 months salary (or more) just to meet expectations.
Do people spend 2 months? The average age of marriage in the U.S. is 26. Median income for people 18-24 is a little under $31,000. If you take 2 month rule for $30,000 income would result in a $5,000 cost for the ring. Yet people on average are spending $2,500 to $4,000. So it appears that people spend closer to 1 to 1.5 months salary on engagement rings on average.
What is the average carat? When I was buying my wifes ring the salesperson told us that the average diamond sold is 1 carat. But this article says that the national average is 0.38 carat. You can buy a 1 carat weight diamond engagement ring starting at $2,600 on Bluenile.com to $2,800 on Amazon.com Bluenile has 0.4 carat rings for as little as $800 and on Amazon I found a .5 carat ring for $300. Keep in mind these are the cheaper rings I could find and they the diamonds have lower quality.
But again, don't let the amount that other people spend dictate how much you spend. You should figure your budget for the ring based on your financial situation.
Should you buy a big carat or a high quality stone? Figure the budget then buy the kind of ring and diamond that the future bride would value the most. Different women will value different things. So find out if the metal of the ring, the size of the diamond, color or clarity is most important and then look for a ring that gets you the most bang for the buck. So for example if the woman isn't as concerned about imperfections that are not visible to the naked eye then you could look for a diamond with some inclusions and get a larger or whiter diamond less money than if you bought a diamond with little inclusions.
When it comes down to it, buying a ring is a personal choice. Some people will spend more or less on a ring than others. But my advice is that you should make sure you spend an amount that is within your budget and avoid going into debt to buy an engagement ring.
Photo by Somma
[edit May 27 2010 : had to fix a couple broken links]
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I don't know about the price, all I know is I spent a little too much on my wife's, but she loves it.
ReplyDeleteI would, however, offer this advice on size vs. quality.
Go with the best Cut quality in your price range. Cut is what give a diamond it's true brilliance. Always sacrifice cut for the other C's. If you have a 1+ carat ring with a poor cut, it, to be frank, will look fake.
My engagement ring cost less than one (2 week) paycheck for my fiance. Of course, it's also a .5 carat man made sapphire on a gorgeous setting. Way better than the traditional ice on a hoop.
ReplyDeleteDon't forget that someone who is making 31,000 thousand is really only making around 23,000 after taxes. This would bring down the value to around 4K for the 2 month rule.
ReplyDeleteThe import of this write up appears to be spend what you can afford. My sentiment exactly. But then a price on a token of love ... just kidding.
ReplyDeleteWhat vexes me is the cost of the wedding. I am not averse to spending all that cash, but please put it towards your mortgage, or blow it on a holiday or a more money than sense car even a ring or a holiday, but on one afternoon's festivity, mmmm
I have to wonder about the purpose of an engagement ring. If we knew its purpose we would have a better idea of how much value we need to invest in it. It is my understanding that wedding and engagement rings were simply gold bands that the bride could barter for travel back to her family if she were abandoned or left widowed by her husband. Now they seem to be a measure of the wealth of the man giving the ring – hence the ratio of the rings value to the man’s income, (ten percent of annual income for example). Of course, if I keep going down this road of thought I’ll eventually start addressing the true meaning of marriage – bringing in the coercive power of the state to ensure the economic security of women and children. Then we have to address the question of what relevance marriage has to people committed to a child free lifestyle, and that naturally will bring up the issue of civil unions and gay marriage.
ReplyDeleteMaybe it’s best not to think too much about the purpose of engagement rings.
I always thought that you should spend 10% of your annual salary for engagement rings.
ReplyDeleteMost people I asked about this says that they should spend about 30% of their annual salary. Some still consider going higher than 30%.
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