How much should you spend on a ring?

17th of October 2013 | by RateCity Staff

Diamond_ring

Jennifer Hawkins' engagement ring cost a reported $200,000, while Brad Pitt forked out a whopping $500,000 for Angelina's diamond, according to reports.

But there's no need to panic, because research shows that Australian women are thinking more about their financial future and less about the size of the diamond.

The study, conducted by online retailer oo.com.au, found that 70 percent of Australian women would like a great-looking engagement ring, but would prefer guys not to splash out on a really expensive rock so they can put the extra money towards saving for a house deposit or a honeymoon.

So how much do you think is reasonable to spend on an engagement ring?

At online forum, Vogue.com.au, this question sparked more than 500 comments, with varying responses.

One comment from "Kristina K" insisted that guys should spend no more than $5000 on an engagement ring: "Any more than that is money wasted… I'd prefer to pay off our place ASAP and have a $20,000 plus honeymoon".

"Crystelle" said: "I know a girl who got engaged about three months ago. Her now-fiancé took out a loan of $40,000 to buy her the exact ring she wanted".

While "Becca-Jayne" writes: "My engagement ring is gorgeous, I love it, and I don't care how much it cost at all".

Meanwhile, as part of the oo.com.au research, survey respondent Mark, 25, from New South Wales said: "I thought it was supposed to be three months' pay. I don't think my girlfriend would be happy if it was any less than that. Women seem to be so competitive when it comes to the size of their rock these days".

Clearly a ring's price tag can polarise opinion, but one thing most agreed on was that the cost of an engagement ring should be relative to a couple's financial situation.

Financial planner Jeremy Vohwinkle said diamond engagement rings shouldn't be a couple's emergency relief fund. He urges couples to use a budget and save up to purchase a ring.

"Stay within your parameters and you'll keep yourself out of debt," he said.  

Savers can turn $1000 into $5000 within a few years by making regular deposits into a high interest savings account.

Alex Parsons, chief executive of RateCity, said despite a low cash rate, some institutions are offering bonus savings rates upwards of 4.5 percent, in return of meeting a few basic conditions such as making reqular deposits.

"If you've got a small amount to start with but are disciplined enough to add to your savings pile every month, then an online savings account can be a great option, he said."

By depositing $1000 into a high interest savings account at a rate of, say 4.5 percent interest, and adding $200 per month, within two years the final balance will have grown to $5907. But if you can afford to save a bit more each month, say $500, you'll reach your goal of $10,000 in less than two years. To work out how much you could save, try using an online savings calculator such as the one at RateCity.

So how much do you think is a reasonable amount to spend on an engagement ring?