Cash gifts can help couples plan, save for future

by Melissa Martin

Money has long been an acceptable wedding gift; however, asking for it outright has historically been a touchy subject. Seeing as many couples have lived on their own prior to marriage and may already have most household essentials, the once taboo topic is fast becoming more acceptable.

According to the wedding planning and registry website The Knot, the number of couples requesting cash on registries created in the first quarter of 2022 increased by 10% compared with the same period in 2021. Along with using money to fund honeymoons, many couples are electing to build a savings account or save for a home.

Kevin Kroskey, managing partner for True Wealth Design, said there are some good financial rules of thumb couples should follow when establishing a sound savings plan. Generally, he said, couples should plan to save for three to six months of their spending needs.

“If your income is bond-like, like you’re a union school teacher, you can get by with less,” Kroskey said. “If your income is more variable, like in a commission-based sales role, or your position/company may be less secure, then you should generally have more savings.”

When it comes to crafting a retirement portfolio, Kroskey suggested couples aim to save 10-20% of their pre-tax income. He added, however, there is an economic principle called “consumption smoothing,” whereby individuals consume more of their income in early years and save less as a percentage of what they earn. Then, as their income grows, they save more of the growth.

“Doing so allows you to have a more consistent lifestyle and not feel unnecessarily poor in your earlier years,” he said, noting that young doctors and high-income professionals he works with take this approach. “But you need to be careful and on a career trajectory where your income is very likely to grow. … This is riskier than saving more early, but it can work well in the right case.”

As for that starter home, Kroskey advises couples get preapproved with a reputable mortgage lender before talking with a Realtor or viewing homes.

“This will help you understand what you can qualify for before getting emotionally attached to a home that you may or may not qualify for,” he said. “If you can save 5% of the purchase price, that would work for FHA loan programs that first-time buyers often utilize.”

After working with couples over the last 20 years, Kroskey said no two handle their household finances the same. Some establish and use only joint accounts, while others keep accounts separate or have a combination of separate accounts and a joint account.

“Some households have one spouse paying bills and another handling investments,” he said. “Any of these and more can work. The important thing is communication.” ∞