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Wedding or bust

Saturday, October 8, 2016 14:34
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RYAN  By Guest Blogger Ryan Lewenza

I recently attended the wedding of a close work colleague at the historic Casa Loma castle in Toronto. Following the wedding ceremony we made our way to the outside terrace overlooking the city. As I marveled at the beauty of the Toronto skyline below, and the libations started to take effect, I wondered to myself, “what the heck is this costing the newlyweds and the family”? Well it wasn’t cheap, and it stoked my curiosity over the costs of a typical wedding and whether it’s really all worth it.

Switching gears from our normal topics on the economy and financial markets, this week’s blog focuses on the escalating costs of weddings, and whether there could be a better use for this money. At the end of the day it’s just a one-day party that often results in a maxed-out credit card and a nasty hangover. Maybe there’s another option.

Our research around this topic started with a simple Google search for the average cost of a Canadian wedding. Our query came up with a few surveys from the Bank of Montreal and Weddingbells magazine which estimate that the average cost of a Canadian wedding ranges from $20,000 to $32,500. Having gone through this exercise myself, and hearing other anecdotal wedding stories, I’m assuming the $32,500 figure is a more accurate estimate. So, given I’m a financial geek, I ran a few numbers to see what the long-term opportunity cost was of having an “average” wedding.

In my analysis I ran two scenarios. The first is that an “unconventional” couple decides to forgo the big fancy wedding and elope, saving the entire $32,500. This parsimonious couple instead invests the money in a TSFA and in a balanced portfolio earning 6% over the long-run. Assuming they are 30 and remain invested until retirement at 65; the couple would see their $32,500 grow to $250,000. And because it’s in a TSFA it grows tax free and when they pull it out it’s not recorded as income like an RSP or RIF. Great!

More realistically, I ran a second scenario where a “thrifty” couple had their wedding but at half the cost of the average, spending a more reasonable $16,250. This thrifty couple then contributed the difference of $16,250 into their TSFA, and invested in the balanced portfolio earning 6% over the same 35 year period. At retirement this couple would have $125,000, a nice chunk of change to start one’s retirement with some good vacations, dinners out or maybe catch a Blue Jays playoff game (let’s go Blue Jays!).

Amount at Retirement from Wedding Savings


Source: Weddingbells, Turner Investments

Now this analysis only speaks to the long-term opportunity costs of holding an expensive wedding and doesn’t account for wedding gifts from family and friends. Despite this, the reality is that most couples will be covering the bulk of the wedding expenses, and in fact, many couples will go into debt to pay for their wedding. According to the BMO survey, on average, couples will use their credit card for 13% of the overall wedding costs, which based on the average wedding cost of $32,500, equates to $4,300 going on the credit card.

What does this work out to?

If you just pay the minimum on the balance with a credit card rate of 18%, it will take this newlywed couple 11 years to pay off the $4,300 while racking up $2,500 in interest, resulting in a total cost of $6,800. If the couple is more aggressive and pay $250 per month, then the $4,300 credit card balance would be paid off in just under 2 years but still result in over $700 in interest expenses.

While we recognize this is an incredibly important moment for any couple, we wonder if all the costs (real and opportunity) and potential for a large credit card bill is really worth it. And not to be too cynical here, but there’s a decent chance that it may not all be sunshine and roses. According to one study, there are roughly 70,000 divorces per year in Canada, with 33% of first marriages ending in divorce. And according to Statistics Canada, currently 2.5 million Canadians are currently recorded as legally divorced, which represents 7.2% of all Canadians.

There’s a good business idea. Combine the services of a wedding planner with a divorce attorney a few years later.

Canadian Divorce Statistics


Source: Statistics Canada, Turner Investments

We hope we haven’t ruined anyone’s Saturday with these grim statistics on wedding costs and divorce rates. But we believe that some Canadian couples may be going too far to try to put on that perfect night. Instead, we suggest that couples consider cutting some superfluous expenses from their wedding budget. A few ideas on that front is cutting out the fat like fancy wedding cakes that few people actually eat, or unnecessary wedding favours like scented candles that nobody’s ever going to use. Pass on the stretch limo, custom designed wedding dress, and videographer. Just focus on what’s important – great food, good music, and free flowing drinks.

Ryan Lewenza, CFA,CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.


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