How Much Should You Spend on an Engagement Ring?

Separating Truth from Myth

Many hopes and fantasies are bundled into diamond engagement rings. They're meant to be worn every day, all day, for all occasions. Some have dreamed about the ideal design of their ring since childhood. For many people, an engagement ring may be the single most expensive jewelry purchase of their lives.

Not surprisingly, couples will also encounter conflicting messages, misinformation, and outright pressure when shopping for the perfect ring. For example, take that old adage about spending a month's salary on your diamond engagement ring. Where did it come from? It's just an old marketing ploy. According to an article for The Knot, diamond marketers created this standard to drum up sales at the start of WWII. This "standard" eventually grew to two months in the 1980s and has since reached three months. The amount you spend presumably reflects the strength of your commitment and your ability to provide for your partner. So, the pressure is on.

To find the ring that's perfect for you, you'll need to put aside marketing ploys and set a budget that's practical and comfortable for you and your partner.

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Diamond Engagement Ring Costs

Let's first take a look at how much consumers in the United States spend on engagement rings.

Average vs Median

In 2021, the average cost of a diamond engagement ring hovered around $5,000. However, if you're looking for a starting point for your budget, the average cost can be deceiving. Perhaps a more helpful number for prospective buyers is the "median" cost, which describes the midpoint of costs across the total span of diamond engagement ring sales. This number was just shy of $2,000.

What does it mean that the average and median costs are so far apart? A few individuals spent significantly more money than others, which bumped the average cost up to $5,000, even though most people spent far less. The "average cost" is far from what the average consumer spends.

Differences Across Geographic Regions

In a country as big the United States, you can expect differences in the costs of engagement rings from region to region. People living in largely urbanized regions spend more than people living in mostly rural areas. Buyers in California, New York, Washington, and New Jersey tend to spend much more money on engagement rings than buyers in South Dakota, Utah, Mississippi, and Maine.

Demographics and Diamond Engagement Ring Costs

Additionally, you'll find a noticeable generational gap in engagement ring shopping habits. Younger people, such as millennials, are generally more comfortable spending significantly less than their older counterparts. Some estimates show that more than 10% of millennials spend less than $1,000 on their engagement rings. There are a number of factors behind this gap. For example, younger shoppers sometimes purchase smaller diamonds and have a greater acceptance of lab-created diamonds.

How to Start Planning Your Engagement Ring Budget

Formulas and "standards" like the one-month rule don't take into account your individual finances. Even if you can resist the marketing pressure, it's just so tempting to stick with a quick and simple rule-of-thumb. However, chances are, it still won't work for you.

Since marriages often involve a joining of finances, one of the first steps couples should take is to have an honest conversation about your engagement ring. This makes some people very uncomfortable, especially those who expect an element of surprise with their proposal. In fact, some studies show that a mere 10% of couples set a budget for their engagement ring together. Nevertheless, a plain conversation may be the fastest way to come up with an acceptable budget.

Here are five questions to consider when discussing expectations and practicalities.

1. Just How Expensive a Ring Do You Have in Mind?

Different couples are going to answer this question in very different ways. This boils down to priorities. Some are happy to have an inexpensive ring that is mostly symbolic. Other couples are willing to make lifestyle sacrifices to have a large, valuable ring.

2. What Debts Do You Have Now, and What Debts Will You Take on After the Wedding?

Your diamond engagement ring and wedding aren't the only expenses you're going to face together as a couple. And most likely, you'll both come into your marriage with previous debts to consider, like student loans. Those won't just disappear after the wedding.

Are you planning on taking a special honeymoon, buying a house, or starting a business? Make a list of your current and anticipated expenses and then rank them, along with your diamond engagement ring, in terms of their importance to both of you. This will greatly help you determine how much money you want to put into your engagement ring.

3. What's Your Current Income?

Without a frank assessment of your income as a couple, you can't prioritize your expenses or create a budget.

4. Can You Hold Off Buying an Expensive Ring for Now?

Perhaps you've found after answering the three previous questions that you do want to buy a large and expensive diamond engagement ring but you have to address other priorities first. In this case, you can discuss delaying the purchase until a later date. Perhaps the wearer can accept a more modest, starter ring while you save to buy a more lavish piece in the future.

5. Do You Need a New Engagement Ring?

Many couples opt for a beloved family heirloom ring. Some may even choose to re-purpose stones from that jewelry piece into a new engagement ring. You can also set new stones in a heirloom ring. Using heirloom rings and stones can help you stay within a tight budget while honoring your family history, too.

However, many don't realize that re-purposing vintage/estate rings or their gemstone components is also a viable, money-saving option. Since these rings are pre-owned, they may cost significantly less than similar, new rings. There's no difference between old and new rings in terms of durability or beauty.

If you start discussing heirloom and vintage rings and stones, you and your partner may even find you can do without a new engagement ring altogether.

Consider Insuring Your Diamond Engagement Ring

If you settle on a budget that represents a large portion of your disposable income, insuring your ring makes a great deal of sense. (And don't forget to include insurance in your budget). Blue Nile offers you a free insurance quote when you purchase on their site. You can also consider independent jewelry insurance companies.

Talk to a Financial Expert

You and your partner should also discuss your budget plans with a financial expert, especially if you plan on buying a valuable ring.

You might find calculators online designed specifically for creating an engagement ring budget. These can prove helpful, but use them with care. They may not take into account all of the income and expenses (current and future) unique to your financial situation.

Stick to Your Budget

Establishing an engagement ring budget may seem like a lot of work, but having one can make your life much easier. Unfortunately, up to 20% of those who work out a budget in advance ultimately decide to spend more than they planned.

If you take the time to create a budget that's comfortable for you and your partner, try your best to stick to it.

Financing Options for Your Diamond Engagement Ring

If you don't have the amount you need for your engagement ring readily available, you might consider financing options.

Many brick-and-mortar, as well as online jewelry stores, offer layaway options. These allow you to spread out payments over a number of months. Some offer this service without charging interest.

Credit cards are another option. Blue Nile offers a credit card that charges no interest if you pay within a set amount of time. (Blue Nile also offers a 1.5% discount if you pay by bank wire transfer).

Personal loans, whether from family or a bank, are another way to help you pay for your engagement ring. Make sure you know the interest rates and terms associated with these loans.

Tips and Tricks for Engagement Ring Savings

Congratulations! You've analyzed your finances, set your engagement ring budget, and arranged financing if needed. This means you've made it through the hard part of this journey. Now the fun begins. You can start searching for the actual ring.

Now the challenge you'll face is making a smart buy. Fortunately, there are many ways to stretch your dollars and buy a fabulous ring for less than you might imagine. IGS Diamond Advice articles offer many tips and tricks.

Here are just a few things to consider that can help you get the most out of your budget.

Choose Diamonds with Grading Reports

If you want to create a design that showcases diamonds, look for stones with professional grading reports. Fortunately, the diamonds available on Blue Nile have reports issued by the renowned Gemological Institute of America (GIA).

Having a professional report means that you know exactly what you're getting in terms of quality. Knowing the quality of a diamond as determined by an independent, professional, non-biased source means you can be sure you're paying a fair price for it.

Lab-Created Diamonds Can Save You Money

Some people will be happy with synthetic or lab-created diamonds in their engagement ring. Lab-created diamonds have the same chemical and physical properties as mined diamonds. They will look and perform just like mined diamonds.

If you include synthetics in your search for a diamond, you'll most likely find a much bigger and high-quality stone for your money. Lab-created diamonds have lower price-per-carat costs than mined diamonds.

Consider Diamond Cuts Beyond Rounds

Not all diamond cuts are created equal. Round diamonds have remained a popular cut for engagement rings for years, but they also have a higher price per carat than cuts such as ovals, marquises, and princesses. As an added bonus, many non-round cuts often appear larger than round stones of the same carat weight due to their unique proportions. 

Juggle the Four Cs

Consider all the Four Cs (Cut, Color, Clarity, and Carat) when shopping for a diamond.

Let's say you want a 2.5-ct oval diamond. The larger size will likely mean a higher price. However, you can look for a stone that grades lower in terms of color or clarity and still find a good value for your money. Some stones with lower color grades may look like they have higher color grades when placed in particular metals or settings. For example, diamonds with mid-range color grades of K through M will look great mounted in yellow gold. Conversely, stones with the highest color grades, D through F, will look yellowish or brown if mounted on yellow gold.

Watch Out for Diamonds at "Magic Numbers"

"Magic numbers" or "magic sizes" refer to carat weights where the price per carat jumps significantly, like 0.90, 1.00, 1.5, 2.0, 3.0, 4.0, and 5.0 carats. This means that a stone weighing 0.98 carats is going to have a significantly lower price per carat than a diamond of identical quality that weighs 1.01 carats. Visually, the difference between a 0.98-ct and a 1.01-ct diamond isn't noticeable, but you'll pay much more for the latter.

If you have an idea of how big you want your primary diamond, look for a stone whose weight falls just below the nearest "magic number."

Consider Colored Gemstone Options

Perhaps you want a non-diamond primary stone for your engagement ring. If so, you can choose a colorless non-diamond, something that resembles a colorless diamond. For example, a white sapphire is a great way to get the look of a diamond without spending nearly as much money.

You can also go a different route entirely and choose a colored gemstone instead. Some of the most famous engagement rings of all time feature beautiful primary stones that are decidedly not diamonds! You can easily find big, beautiful colored gemstones that will cost far less than diamonds. However, if money is no object, rubies, blue sapphires, and emeralds can easily exceed diamonds in price.

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Settings Can Make Your Stone Look Bigger

If you want a ring with a large primary stone but your budget says otherwise, take a look at settings that make the center stones look bigger than they actually are. Illusion settings and halos are a great way to accomplish this. 

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Customize Your Diamond Engagement Ring

Some retailers, like Blue Nile, allow you to customize every aspect of your ring. You can find the perfect setting and match it with primary stones you've personally selected. Building your ring using settings and stones from the same retailer can save you money, too.

Buy Wedding Sets

Online jewelers like Blue Nile sell wedding sets that include both engagement and wedding bands. These complementary pieces are made to be worn next to each other. Purchasing a set may get you a better deal than buying the two rings separately.

Metal Choices Will Influence the Price of Your Diamond Engagement Ring

The prices of platinum, gold, and silver change frequently. Know the current prices of these jewelry metals before you choose a shank and setting.

If you're buying a gold ring, you'll also deal with different gold karats (K) or purity. You'll commonly encounter 22K, 18K, and 14K gold in jewelry. Higher karat gold costs more than lower karat gold but has less durability. Generally speaking, 14K is the sweet spot for most buyers. It's stronger than 22K or 18K but still maintains the famous golden luster.

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Conclusion

Shopping for diamond engagement rings should be a joyous time. After all, engagement rings mark a point in your life where you formalize a commitment to a loved one.

Setting a budget for your engagement ring is very important. If you know how much you can comfortably spend, searching for the perfect ring will be far less stressful. Thanks to an abundance of options on the market, you'll find beautiful options at every price point.