I have been blessed with a fine son, now 24, and two beautiful and talented daughters, 19 and 15 respectively. When it comes to getting married, we, as their parents, are expected to foot the bill for the daughters' weddings. I did not have the foresight (nor the means) to establish and fund a "wedding fund" for my daughters while they were growing up. However, I have a plan for what I'm going to do for their "big day".
My wife likes to watch the cable TV show "Say Yes to the Dress", where brides-to-be and their families go to upscale bridal shops in New York City or Atlanta and try on various wedding gowns in their search for that "perfect dress" for their big day. I am stunned, absolutely stunned at the prices the young women and their families that appear on the show are willing to pay for a wedding dress, a dress that in all likelihood they will wear once and then package up and tuck away their attics, never to be worn again.
And the wedding dress is just a portion of the cost of a typical wedding. I did a Google search on "Typical Wedding Costs", and got 9,560,000 results returned. Of the top listed links returned by my search, the consensus was that the average cost of a wedding is somewhere in the neighborhood of $26,000, and depending on where you live in the country (such as New York City), the average cost is considerably higher.
I grew up on the East Coast (New Jersey, to be exact), and remember the many weddings that I attended as being large, extravagant events. At this stage in my life, I'm playing catch-up with trying to save for a comfortable retirement, and the prospect of spending so much money on such a one-time event troubles me.
So, here is my plan: I sat my daughters down and explained to them that if they could keep the costs of their weddings down to a reasonable amount, I would take a portion of the difference between the typical cost of a wedding and what we end up spending on their wedding and use that money to fund an IRA in their names made up of solid, blue-chip companies with a history of consistently growing their dividends; in other words, Dividend Champions.
Now, I'm not saying that their wedding reception needs to be as austere as punch and cookies in the cultural hall of our local church, but there are a lot wedding line items that can be significantly reduced or even eliminated, not the least of which is the cost of their wedding gowns.
If I were setting up these "wedding alternative" IRAs for my oldest daughter today, I would take the amount we save, which I'm estimating to be $10,000 or more, and divide it as evenly as possible between the shares of common stock of five companies such as the following:
1 Yr Div Growth
5 Yr Div Growth
10 Yr Div Growth
Of course, there are many great dividend payers to choose from. For this list I used David Fish's CCC spreadsheet and looked for companies that had the best 5 and 10 year dividend growth rates, good 1 year dividend growth rates, were household names and represented different industries.
What are some of the ways we could cut back on wedding costs so that we could fund such a portfolio? Well, holding the reception in the church's cultural hall isn't a bad idea for starters, as there would be no facility charge. Using the list of typical wedding cost items from costofwedding.com, here are some other line items that we could reduce or even eliminate:
- Keep the number of bridesmaids to a minimum (sister, best friend, cousin).
- Keep the cost of the bride's wedding gown down, no more than $1,250 to $1,500.
- No tuxedo rental for me (Father of the Bride - I have a tailcoat that I think I still fit into).
- Limit the entertainment to a few musicians/ensemble or, better yet, pre-record some music to play during the reception.
- No bridesmaids bouquets (corsages will do).
- No ceremony decorations or flowers.
- Keep the reception hall decorations simple, but tasteful, with few or no flower arrangements.
- No reception table centerpieces.
- No gifts for the parents.
- No wedding favors for the guests.
- No "Save the Date" cards.
- No table name place cards (open seating).
- Hire a friend (who knows what they're doing) to take the wedding pictures.
- No wedding consultant.
- No limo.
- No bar service (we don't drink).
- No reception menus.
- Simple food catered by a local restaurant, buffet style (no prime rib, etc.).
That still leaves a lot of things to have to pay for, but taking an approach such as this should keep costs down to a minimum. I don't want to be a Scrooge with their "big day", but when I think back on all the weddings I've been to all I can think of is, what a waste to throw such a big bash or to buy a wedding gown that's far more expensive than it needs to be.
Of course, I'm still going to be out about $20,000 per wedding, since I'll be funding my daughters' IRAs with what we're not paying for a more extravagant wedding, but I won't mind since those dollars will be going to a much better cause than a one-night splurge.
The other caveat that I will impose on this wedding gift of an IRA will be that they absolutely, positively cannot touch this money until they retire. To that end, what I'll probably do is maintain the accounts myself, albeit in my daughters' names, and reinvest the dividends that accumulate into either more shares of what I seeded the accounts with, or by picking some other Dividend Champion to add to their portfolios.
One of the biggest mistakes I've made in my life is not starting saving seriously for retirement when I was much younger than I am today. I don't want my daughters to make the same mistakes that I did, and by providing them with a starter IRA with a portfolio of Dividend Champions, and reinvesting the accumulated dividends, I expect that this wedding gift will help provide them with better retirement prospects and peace of mind than I have when they get to be my age.
Additional disclosure: I am not a professional investment advisor or financial analyst; I’m just a guy who likes to crunch numbers and can make an Excel spreadsheet do pretty much whatever I want it to do, and I’m doing my best to manage my own portfolio. This article is in no way an endorsement of any of the stocks discussed in it, and as always, you need to do your own research and due diligence before you decide to trade any securities or other products.