How to finance an engagement ring

While most couples have moved on from the idea that an engagement ring should cost three months' salary, it's still a fairly significant purchase. In 2023, the average amount spent on a ring was $5,500, according to The Knot. 

As with any big-ticket item, it's important to do your research before buying an engagement ring. Proper planning can make the whole process less stressful and more affordable.

If you're gearing up to pop the question, CNBC Select has five ways to finance that engagement ring.

Depending on your income and expenses, you'll need several months or even a few years to save up the money for an engagement ring.

The best strategy is to start by deciding how much you want to spend and when you want to propose. Then divide the total dollar amount by the number of months you have to reach that goal. So, if you want to spend $5,500 on a ring and propose in a year, you'd need to put aside $458 per month. (Setting up automatic monthly transfers into a special savings account can help.)

Don't forget about sales tax and insurance, however, which could add a few months to your timeline.

If you're in a rush to get hitched, a high-yield Western Alliance Bank High-Yield Savings Account can supercharge your ring fund. It currently offers an annual percentage yield (APY) of 5.24%, one of the highest available. There's only a $1 minimum deposit required and no monthly fees.

If you need help organizing your savings plan, an Ally Online Savings Account lets you make up to 10 different "buckets," each labeled for a unique purpose. You can make a new bucket just for the ring — but be sure to give it a cryptic name if you share the account with your partner and you want to keep the engagement a surprise.

If you don't want to wait, take a lesson out of LeVar Harris' playbook: Harris knew he wanted to propose to his college sweetheart, Reanne Swafford-Harris. But he was a little tight on cash after buying his first house.

Harris, a private client banker at the time, didn't want to use a credit card to buy a ring because he saw so many colleagues and clients struggling with debt. Instead, he followed the advice of a client who told him, "I never buy the things I want. I buy assets that buy the things I want."

Harris rented out a spare room in his two-bedroom home and, within a year, had saved up $5,000 from rental income.

"I was able to negotiate $200 to $300 off of the ring because I paid in cash, and the jeweler didn't have to pay any processing fees," Harris told CNBC Select.

Harris and his wife share similar cash-saving tips on their Money and Marriage YouTube channel.

Like most major retailers, jewelry stores may have a store credit card that you can apply for. Signing up for a store card might qualify you for a special interest period or an additional discount at checkout, but be sure to look out for deferred interest. If you sign up for a card that charges deferred interest, you could get hit with huge charges if you're unable to pay off your purchase during the introductory APR period.

A 0% APR credit card that also has a sizeable welcome bonus could be an even better option. You can pay over time without accruing interest, while also maximizing your savings by taking advantage of your large purchase to meet a minimum spend requirement.

With the Amex EveryDay® Credit Card, you could finance the engagement ring with a 0% intro APR on purchases for 15 months from the date of account opening (after, 18.24% - 29.24% variable, see rate and fees), plus earn 10,000 Membership Rewards® points after you make $2,000 in purchases in the first six months after opening the card.

You could use those points toward a honeymoon or as a statement credit to cover a future balance.

Buy now, pay later (BNPL) and other point-of-sale (POS) financing options are basically one-time installment loans that give you a flexible, pay-over-time option. These loans, from companies like Affirm and Afterpay, often come with 0% interest periods.

One of the few BNPL providers that has long-term financing options with a 0% APR, Affirm offers loans of up to $25,000 with terms ranging from one month to five years. There are no late fees but if you don't make on-time payments it could impact your credit score.

Affirm gets high marks for its widespread availability: In addition to the hundreds of thousands of merchants who accept it, consumers can use it with any retailers that aren't partners through Affirm's website or mobile app.

Afterpay offers a financing option with four installment payments due every two weeks over a six-week term. Customers make a down payment at the time of purchase (typically 25% of the total cost) and then pay the rest over six weeks.

With any POS program, be sure that you're clear on the terms and conditions with any kind of promotional deal. If you're offered low or 0% interest, make sure you can pay it off within the allotted timeframe and that you know the regular interest rate you would have to pay if you couldn't.

While generally more expensive than using 0% financing or paying in cash, personal loans are becoming a more common way to finance large purchases.

A personal loan can give you a lower interest rate and more time to pay than a credit card. In November 2023, the average annual percentage rate (APR) on a two-year personal loan was 12.35%, according to the Federal Reserve, compared to an average credit card APR of 21.47%.

Just be on the lookout for an origination (sign-up) fees. In addition, some lenders only let you borrow cash for particular uses, such as debt consolidation or refinancing.

LightStream, the online lending arm of Truist Bank, offers low-interest loans with flexible terms for people with good credit. There are no origination or late fees and few restrictions on how you can use the money.

Planning your proposal can be romantic, but paying off debt is anything but. Start your marriage on solid financial footing by making smart decisions about the engagement ring you buy. Do your research, save money and make the right choice for you and your partner.

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