How to save and invest for a wedding

Some couples get hitched quickly in a low-cost wedding; others are married by ‘Elvis’ in Vegas. For traditional types, Faith Glasgow has some great tips to pay for your Big Day.

Spring is coming, the sap is rising, and Alfred Lord Tennyson wouldn’t have got any prizes for observing that young (and not so young) people’s fancies are lightly turning to thoughts of love.

Particularly, of course, with Valentine’s Day looming large – though perhaps that’s become a bigger deal since Tennyson’s day. Certainly, more than one in five people who are engaged or married say they were proposed to on 14 February, according to a 2018 survey reported in Brides Magazine.

It does mean a lot of excited couples are likely to be thinking about how to pay for their big day in the coming weeks and months. So here’s interactive investor’s early gift to you – some investment ideas to help ensure your wedding dreams come true.

What’s it going to cost?

There are countless variations on the theme. You could get married for a few hundred quid if you opt for a registry office ceremony and dinner with a handful of friends. The basic ceremony costs including hiring a room, each person giving notice and a marriage certificate typically came up to around £140 as at 2020.

Running away to Las Vegas could also be quite cost-effective. Sample packages exclude flight and hotel - but that’s effectively the honeymoon, isn’t it? – and range from £325 for a drive-thru wedding or £549 for an Elvis wedding to more than £1,300 for a five-star hotel experience.

However, before the pandemic put paid to large gatherings, the average conventional wedding with around 100 guests in the evening cost around £32,000, according to the 2019 National Wedding Survey (NWS). And the sky’s the limit if you really want to do things in style.

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Who pays?

The days of the bride’s parents footing the bill are long gone, it seems. The National Wedding Survey reports that half of all couples now pay for their own wedding themselves, although more than half also receive help from their families.

That trend raises the question of how young couples can cover those costs. The survey found that most couples use their savings, but one in five spreads some of the expense with a credit card, and one in 10 takes out a loan.

Timescale is key

The average length of time for an engagement is around 20 months, according to the NWS, but such an average masks broad variation. Some people get hitched within a few months; others wait a few years; and others again are life partners with a family before they actually get around to tying the knot.

But if you’re aiming to pay the bills yourself, don’t have a trust fund or a head-turning salary, and haven’t been building a secret financial trousseau beforehand, you basically have three choices. You can plan a modest celebration in line with what you can realistically afford, borrow money and start married life with an additional burden of debt, or else allow a period of time to build a wedding fund. 

Remember also that much of the outlay occurs before the big day, in the shape of clothes, invitations, and deposits for a venue, flowers, catering and so on, so you do need to be able to access at least some of your wedding pot in advance.

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Get organised

It sounds obvious, but to keep on top of your wedding finances, the first thing to do is to make a list of all the elements involved, large and small, and how much they will cost (plus inflation).

Then you can work out how much you both need to save each month to get wed on your chosen date. Alternatively, you turn things around: calculate a realistic amount you’ll be able to save each month and how long it will take you to save that sum, and fix the big day for that point.

Regular saving from your earnings is always most easily and painlessly done by setting up a monthly direct debit into your chosen savings account or investment.

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Savings options

For a short-term goal of less than five years, conventional investment wisdom suggests savings solutions are the safest choice. The price you’ll pay, however, is that even savings accounts with the best rates are paying way below inflation, so your money is effectively losing purchasing power.

At present, with CPI inflation running at over 5% and expected to top 7% in spring 2022, if you have been given or already accumulated a cash lump sum, it’s probably sensible to use it for deposits to lock in current prices on the most expensive elements of the wedding.

Otherwise you might consider tying your money up in a fixed-rate bond.The best one-year options as of 1 February 2022 pay around 1.35%, according to Savings Champions, and on two-year bonds the best rates are around 1.6%. Top-paying regular savings accounts pay around 1%.

Investment ideas

When it comes to building up a wedding fund over the medium term, real growth is more likely to be delivered if you have at least some exposure to stock market or other non-cash assets. The danger with investing into the stock market is that over the short term your money may fall in value and not have time to recover. However, on a four- or five-year view that risk is small.

Moreover, there are specific investment types that are relatively low-risk, or that pay a pretty secure payout each year. We’ll look at a couple of options in a moment.

Regular investing

It makes a lot of sense to utilise a regular investing scheme such as that on offer from interactive investor.  Not only does it mean you don’t have to make monthly decisions because the money just moves automatically into your investment account and your chosen investments, but it can also work out both less risky and more profitable than investing a lump sum.

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That’s because of something called pound-cost averaging. As the market fluctuates, the amount you pay in each month buys more shares (if it’s falling) or fewer (if it’s rising). Over time, you end up paying the average price of the shares. In contrast, many investors who jump on an investment bandwagon with a lump sum end up paying over the odds for their holdings - a decision that can backfire painfully if share prices then decline.

Lower-risk investment ideas

1  Dividend heroes: a number of highly regarded investment trusts have been paying out a growing dividends to investors each year for decades - in some cases, more than 50 years. This so-called ‘progressive dividend policy’ has become a valuable asset for those trusts, so while nothing is guaranteed it’s very unlikely that they would jeopardise their dividend hero status.

For shorter-term investors, a reliable income acts as a safeguard on returns, even if the market isn’t delivering share price rises.

Importantly, not all the dividend heroes have big yields, but among those that do are UK-focused City of London, top hero with 55 years of consecutive dividend increases, yielding 4.8%, and Aberdeen Standard Equity Income, paying a meaty 5.8% and with 21 years as a hero; and global fund Murray International, on a 4.7% yield and with a 16-year record.

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2  Capital preservation options: a handful of highly regarded investment trusts in the Flexible sector aim specifically to protect investors’ capital and deliver growth ahead of inflation. They do this by investing across a wide range of assets, including gold, index-linked bonds, property, private equity and in some case hedge funds as well as equities.

The three best-known options are Capital Gearing (share price up 27% over three years to 4 February), RIT Capital Partners Ord (LSE:RCP) and Ruffer Investment Company (+46%).

One open-ended fund with a similarly cautious multi-asset approach and a similarly experienced manager is Troy Trojan, which has achieved annualised total returns of 9% over the past three years to 4 February.