Savings accounts aren’t just for squirreling away funds for a rainy day. You can also use them to save for specific, short-term goals. That includes your upcoming wedding.
In fact, opening a wedding savings account could be a great way to make sure you can cover wedding expenses, avoid accumulating debt, and get in the habit of working toward financial goals as a couple.
But why open a separate account just for wedding savings? A dedicated wedding savings account could protect that money from getting eaten up by other daily living expenses, according to Jessica Bishop, founder of The Budget Savvy Bride website and author of the best-selling wedding planning book “The Budget-Savvy Wedding Planner & Organizer.”
“Putting your wedding money in a separate account ensures you won’t have easy access to it with your regular debit card, and it can be earmarked specifically for wedding-related purchases,” she says.
Plus, it can make tracking wedding expenses much easier — no sifting through long credit card statements or piles of receipts. And by making it easier to see what you’ve spent so far, it’s also easier to stay on track with your budget.
Should You Open a Joint Account for Wedding Expenses?
One big question you might have is whether your marriage savings account should be owned by just one of you, or if it should be a joint savings account. There’s no one right answer for every couple. But even if you decide to keep your finances separate as a married couple (about a quarter of couples do, according to Bank of America’s “2018 Better Money Habits Millennial Report”), a joint wedding savings account can still be beneficial.
“If the two of you can both contribute regularly to your joint wedding savings account, you are working together as a team to pay for your big day,” Bishop says.
That way, you’re both equally responsible for the wedding savings. You can also track how much you’ve saved and where the money is going. Plus, it’s much easier to pay for wedding expenses on the fly when both people have access to the account.
Wedding Savings Accounts and Interest Rates
So you’ve decided that a wedding savings account is right for you. Now you need to choose a bank account for wedding savings. Often, that starts with finding accounts that offer high-interest rates, so your money can grow until you’re ready to use it.
Generally, online banks tend to have higher interest rates for savings accounts than traditional brick and mortar banks. For example, Bishop suggests checking out Ally or Capital One 360, which offer 1.70% APY and 1.80% APY, respectively, as of December 2019. Compare that to national banks like Chase, which offers 0.01% APY on its basic savings account, or Bank of America, which offers 0.03% APY as of December 2019.
How much more could you save with a high-yield online account? Say you had $10,000 saved for 12 months. Assuming interest compounds monthly, you’d end up with an extra $180 at the end of one year with a rate of 1.80% APY, versus just $1 at 0.01% APY. That’s enough to splurge on a fancy bouquet or add a couple more people to your guest list.
Other benefits of online savings accounts — beyond great rates — include low fees, easy transfers between accounts, and perks like mobile check deposit. Just keep in mind that there are no physical locations where you can make deposits or withdrawals, other than ATMs in some cases (online banks such as Ally, Capital One, FNBO Direct, and others allow you to use third-party ATMs at no cost, but not all do).
If you prefer to bank in person, check out your local community bank or credit union. Often, these also have better rates and lower fees than larger, national banks because they must compete more to attract customers.
How Much to Save in a Wedding Bank Account
Though you may not spend a whopping $33,931 on your wedding, which is the average cost, according to “The Knot 2018 Real Weddings Study”, you’ll likely need a pretty big chunk of change. Or maybe you’ll need more. Either way, many costs are due well in advance of the wedding, such as rings, the dress, licenses, deposits, and bills from vendors.
The size of your budget will come down to the type of wedding you want to have, including the location and the size of the guest list.
“The best course of action is to figure out the who, what, where, when, and why of their wedding, and then do research to determine how much it will take to pull it off,” Bishop says.
Once you have a number in mind, there are a few things you can do to keep your savings on track.
Start saving for your wedding immediately. Ideally, you’ll come up with your budget and monthly savings goal as soon as you’re engaged. “It’s never too soon to start saving for your big day. Weddings always have costs you don’t expect, so it never hurts to save as much as possible,” Bishop says.
Set up automatic contributions to your wedding savings account. It’s also a good idea to set your savings on autopilot, so you’re not tempted to use the money for something else. “Choose a bank that allows you to set up automatic withdrawals or transfers,” Bishop says. “Schedule transfers soon after your paycheck hits your account. This will [ensure] you don’t have access to those funds in your regular checking account to spend on a frivolous Target run or an online Sephora shopping spree.”
Keep up the saving habit. Once your wedding is paid for, you don’t have to abandon your habit of saving together as a couple. “Change its purpose for another savings goal, such as a down payment on a home or a dream vacation,” Bishop says.
The Bottom Line on Wedding Savings Accounts
Don’t worry if you can’t save the entire amount you need. There are many ways to pay for a wedding, and it’s normal to take on a bit of wedding debt. The key is to keep that debt to a minimum by saving as much as possible. A wedding savings account is one of the best tools you can use to accomplish that.