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What To Do With Wedding Money: 10 Ways To Use Gift Money
04 Sep 2024 •7 min read
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What To Do With Wedding Money: 10 Ways To Use Gift Money
Wondering what to do with wedding gift money? We explain what to do with wedding money so that it makes a difference to your future (rather than being wasted). Here are 10 smart ways to use your cash to set yourselves up for financial success.
Before we dive into how to use your wedding money, let's address the elephant in the room: cash gifts are becoming increasingly popular. Many couples are opting to set up a wedding fund instead of traditional gift registries. This trend allows guests to contribute directly to the couple's financial future, rather than purchasing physical items that may or may not be needed.
What to do with wedding money: 10 smart ways to use it
Wedding gift money provides newlyweds with flexibility and the opportunity to make savvy financial decisions that can benefit them for years to come
Now that you've received this generous influx of cash, let's explore the smart ways to utilize your funds:
1. Pay Off High-Interest Debt
One of the wisest moves you can make with your wedding money is to tackle any existing high-interest debt. This could include credit card balances or personal loans, especially those incurred for wedding expenses. By paying off these debts, you'll:
- Increase your monthly cash flow
- Improve your credit score
- Reduce financial stress in your new marriage
Consider allocating a significant portion of your wedding gift money to pay off debt first. This strategy can save you thousands in interest payments over time. For example, if you have $5,000 in credit card debt with an 18% interest rate, using your wedding money to pay it off could save you nearly $900 in interest in just one year.
2. Build an Emergency Fund
Life is unpredictable, and having a financial safety net is crucial. Use a portion of your wedding gift money to establish or bolster your emergency fund. Aim for:
- 3-6 months of living expenses
- Keep it in a high-yield savings account for easy access
- Peace of mind knowing you're prepared for unexpected costs
An emergency fund is even more important as you start your married life together. It can help you weather unexpected expenses or job loss without resorting to high-interest borrowing. Consider setting aside at least 20% of your wedding gift money for this purpose. For instance, if you received $10,000 in wedding gifts, allocating $2,000 to your emergency fund can provide a solid foundation for financial security.
3. Save for a Home Down Payment
If homeownership is on your horizon, wedding gift money can give your savings a significant boost. Consider:
- Keeping these funds in a high-interest savings account
- Researching first-time homebuyer programs in your area
- Setting a timeline for your home purchase goal
Saving for a down payment is often one of the biggest financial hurdles for couples looking to buy their first home. Your wedding gift money can be a substantial contribution towards this goal. For example, if you're aiming for a 20% down payment on a $300,000 home, you'd need $60,000. If you received $15,000 in wedding gifts and decide to put all of it towards your down payment, you're already 25% of the way there
4. Invest in Your Future
Make your money work for you by investing a portion of your wedding gifts. Options include:
- Contributing to retirement accounts like 401(k)s or IRAs
- Opening a brokerage account for long-term investing
- Exploring low-risk options like index funds for beginners
Investing your wedding gift money can help you build wealth over time. For instance, if you invest $5,000 of your wedding money in a diversified portfolio with an average annual return of 7%, it could grow to over $19,000 in 20 years without any additional contributions. This strategy allows you to leverage your wedding gifts for long-term financial growth
5. Fund Home Improvements
If you already own a home, consider using some of the money for value-adding improvements:
- Update kitchen appliances or bathroom fixtures
- Invest in energy-efficient upgrades to save on bills
- Enhance curb appeal with landscaping projects
Home improvements can increase your property value and make your living space more enjoyable. For example, spending $10,000 of your wedding gift money on a minor kitchen remodel could potentially increase your home's value by $8,000 to $12,000, according to some estimates. Plus, you'll get to enjoy the upgraded space in your daily life.
6. Splurge on Your Honeymoon
While financial responsibility is important, don't forget to enjoy yourselves! Allocate some funds for an unforgettable honeymoon:
- Upgrade your accommodations or flight class
- Book unique experiences or excursions
- Extend your trip for a few extra days of relaxation
Your honeymoon is a once-in-a-lifetime experience, and using some of your wedding gift money to make it extra special can be a worthwhile investment in your relationship. Consider setting aside 10-15% of your total wedding gift money for this purpose. For instance, if you received $20,000 in gifts, using $2,000-$3,000 to upgrade your honeymoon can create lasting memories without compromising your other financial goals.
7. Invest in Your Education
Boost your earning potential by investing in yourself:
- Take professional development courses
- Pursue an advanced degree
- Learn a new skill that could lead to a side hustle
Investing in education can have a significant return on investment. For example, spending $5,000 of your wedding gift money on a professional certification could potentially increase your annual salary by $10,000 or more, depending on your field. This decision could pay for itself within a year and continue to benefit you throughout your career.
8. Start a Business
If you've been dreaming of entrepreneurship, your wedding fund could provide the seed money:
- Develop a solid business plan
- Invest in necessary equipment or inventory
- Cover initial marketing and legal costs
Starting a business with your wedding gift money could be a way to create long-term financial stability and pursue your passions. Even a small investment can go a long way. For instance, using $3,000 to start an online business could potentially grow into a significant source of income over time.
9. Give Back to Your Community
Share your good fortune by donating a portion of your wedding money:
- Choose a cause that's meaningful to both of you
- Consider setting up a recurring donation plan
- Look into matching programs through your employer
Donating some of your wedding gift money can be a meaningful way to start your married life together. Consider allocating 5-10% of your total gifts to charitable causes. For example, if you received $25,000 in wedding gifts, donating $1,250-$2,500 could make a significant impact on a cause you care about while still leaving plenty for your other financial goals
10. Plan for Your Family's Future
If starting a family is in your plans, set aside some funds for future expenses:
- Start a college savings plan
- Save for potential fertility treatments or adoption costs
- Create a "new baby" fund for essential items and medical expenses
Planning for your family's future is a smart use of wedding gift money. For instance, if you put $5,000 into a 529 college savings plan for your future child and contribute an additional $100 per month, assuming a 6% annual return, you could have over $50,000 saved by the time your child turns 18
What to do with wedding gift money: Key takeaways & tips
Remember, how you handle this wedding gift money can set the tone for your financial future as a couple. By making thoughtful decisions of what to do with your wedding money and working together, you can use these funds to build a strong foundation for your shared life.
Whether you choose to pay off debt, save for a home, or invest in your future, the key is to align your choices with your shared values and long-term goals. And don't forget - if you're planning your own wedding, consider setting up a wedding fund to give your guests an easy way to contribute to your financial future.
Receiving a substantial sum of money as wedding gifts is exciting, but it also comes with responsibility. Here are some final tips on what to do with wedding money:
- Communicate with your partner: Discuss your financial goals and priorities together.
- Create a plan: Allocate percentages of the total to different goals rather than specific dollar amounts.
- Don't rush: Take time to research and consider your options before making any large financial decisions.
- Seek professional advice: Consider consulting with a financial advisor to optimize your strategy.
- Balance enjoyment and responsibility: While it's important to be financially savvy, don't forget to use some of the money to create lasting memories together.
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About The Author
Kellee Khalil is the Founder & CEO of Loverly. She lives in upstate NY with her fiancé and two dogs.
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