Marriage or mortgage: Which is the better investment?
Couples are sometimes torn between making their wedding a big celebration and starting their financial life together on the right foot.
Couples are sometimes torn between making their wedding a big celebration and starting their financial life together on the right foot.
Weddings can be expensive, but so can many of the things that come after a wedding—like a home purchase, starting a family and saving for retirement. And so money is an important relationship issue even before a couple ties the knot.
Both weddings and home purchases can both cause people to think or spend irrationally—especially amid the rush to “get in the real estate market” while mortgage rates are at historically low levels. How can a couple decide which is the better use of their hard-earned savings?
Let’s start with weddings. The costs associated with their Big Day can range drastically from couple to couple, depending on their wedding plans and the size of their family. The dollars differ widely among industry estimates, as well. According to Wedding Wire’s 2019 Global Wedding Report, the average Canadian wedding costs US$21,900—that is, $29,059 Canadian at the average 2019 exchange rate. Meanwhile, the consumer data company Statista pegged the average Canadian wedding at a much higher $42,401, back in 2017.
Given the national average home price in February 2021 of $678,091, a 5% minimum down payment would be $33,905—or about the average cost of a wedding.
This begs the question: are young people making their marriages more difficult by making their wedding budgets too high? Are they trading in a home down payment for a half-day party with their friends and family?
The rational choice for a couple in the long term is probably to forgo an expensive wedding. But many brides, grooms and their families celebrate traditional wedding ceremonies and receptions and feel the desire or the pressure to do so.
COVID-19 precautions have prevented many couples from throwing big weddings. This is bad on just about every level, but a modest wedding could be good financially for a couple.
If a 30-year-old couple invests $35,000 at a 5% annual rate of return, it could turn into over $193,000 by retirement at age 65. Granted, $193,000 would not buy them nearly as much in the future due to a rising cost of living over time, but it is the same as about $97,000 in today’s dollars, assuming 2% annual inflation. That is the equivalent of about $140,000 of salary net of tax (varies by province). Could forgoing a wedding allow you to retire a year or two earlier as a result? Absolutely. It is romantic to elope at city hall? Absolutely not.
Money stress is commonly cited as one of, if not the primary point of contention, among spouses. And disagreement about the cost of a wedding, whether it is verbalized or not, could set the stage for a marriage.
I am not saying you should forgo a wedding; I am just saying a couple should consider what they could be giving up by having a lavish, over-the-top celebration, or how they could be making their future lives together harder by overspending on a wedding.
Beyond budgeting for a wedding, some of the other things that an engaged couple should be talking about include:
There are plenty of other considerations ranging from tax planning (whose RRSP to contribute to), estate planning (wills and powers of attorney), etc., but financial planning as a couple—like marriage—is a marathon, not a sprint.
Which brings us back to the question: Which is the “better” investment—a wedding or a down payment on a home? Look, sometimes the heart wants what it wants. Many young couples feel pressure or just the desire to have the wedding they have always dreamed of having. It is important, however, to consider how much to budget for a wedding, and the resulting impact on the years to come.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.
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An elephant in the room? Unfortunately approximately 40% of marriages end in divorce. Not a fun topic to talk about when planning a wedding, however it helps keep a perspective.
Given money is a key stressor in relationships, you may be setting up your marriage for better success by keeping to a romantic, while modest wedding.
More people at the wedding and more wedding component expenses also tend to add to the stress of the wedding day itself with expectations for perfection.
Personally, I loved our smaller wedding with close friends and family: a little more casual, time to enjoy and chat without a schedule moving from one (expensive) component to another.