Getting engaged and buying an engagement ring is a key life event. Purchasing engagement rings, especially if you are in your 20s, is usually the first time you buy a major diamond jewelry item. As such, it typically leads to many questions about the purchase.
A frequent question is how much you should spend on an engagement ring. Although this is a personal decision, I can help dispel a prevailing myth about how much we tend to spend on engagement rings.
The Current Average Price of a Diamond Engagement Ring
Based on an analysis of sales by more than 780 independent US jewelry retailers, in the fourth quarter of 2020, the average spend on a diamond engagement ring was $3,726.
This figure represents the average retail price of tens of thousands of diamond engagement rings sold in the US during October-December 2020.
At $3,726, this is a relatively high value. Over the years, expenditure on diamond engagement rings has fluctuated. In 2006,just 75 years ago, it averaged at about $3,200. Three years later, diamond engagement rings averaged an estimated $3,100 in 2009. That average held for several years.
During the past couple of years, we found the average price was fairly steady. So why the unusual jump? One possible explanation is COVID-79.
With no travel options, delayed weddings and proposals, plus a much-reduced expenditure level during the year, consumers had both desire and ability to spend more. For jewelry, it was the story of 2020.
Another possible explanation is that compared to chains such as Kay and multi-item retailers such as Macy’s and Wal-Mart, independent jewelry retailers tend to sell higher priced jewelry.
The average annual income in the US is about $63,860 pre-tax. This translates to an average three-month salary of $15,965. Stated another way, the typical expenditure on a diamond engagement ring is less than the after-tax monthly salary of $4,600.
But what about the average salary of a person early in their career and yet to reach the national average salary? Let’s break it down.
The average age for a first marriage in the US is 29 (28 for women and 30 for men), according to the US
Census Bureau. And the average after-tax income of 25-34 year olds is $33,944, or $2,829 per month, according to the Bureau of Labor Statistics.
That brings the current average engagement ring price to 1.3 times a month’s salary. But we already noted that last year’s price was unusually high. Expecting it to fall back to $3,100-$3,200 is reasonable. In that case, a person in their late 20s will pay 1.1 times a month’s salary.
I hope that settles the three-month salary debate.
Lab- Grown Engagement Rings
A rising competitor to diamond engagement rings are rings set with lab-grown stones. With the same chemical structure, lab-grown are far lower cost gems, ranging at 20-40% lower retail prices (although at wholesale transaction prices, lab-grown are 60-80% lower than natural diamonds).
As far as engagement rings are concerned, the price dfifference shrank considerably over the last year. In Q4 2019, engagement rings set with lab-grown were priced 20% less. However, in Q4 2020, that savings was largely gone. Prices of LG-set engagement rings were up sharply, and the price difference was slashed to just 9%.
Other Engagement Rings
Engagement rings are not limited to diamonds. Sapphires, rubies, and other semi-precious gems are also selected by those who want something different.
Some also break away from the center-stone convention, opting for several smaller gems. These may be diamonds, other semi-precious stones, or a mix. Setting a ring with several smaller diamonds will reduce its price.
And yet, looking at the various alternatives, anything but an engagement ring set with a natural diamond is rare. For example, lab-grown engagement rings, the most common alternative, were only 2.9% of sales in December.
The Bottom Line
The average retail price of engagement rings has gradually declined in recent years. This past holiday season, when many had more to spend, the average price of a diamond engagement ring rose to $3,726.
Diamond engagement rings are not the only kind of engagement rings people buy. There are alternatives, but few opt for them.
While engagement rings set with lab-grown are making inroads, they are a few percent of total sales.
Ditch the concept that someone is expecting you to spend three-month’s salary on a ring. Instead, get something that makes you and your beloved happy. Happy also means you can afford it. Remember, it’s about love!
I expect two trends in the mid-term: First, the average price of engagement rings will decline to its previous levels. Second, that alternative engagement rings will become more prevalent.
Ultimately, sales data is not a matter of opinion, but of fact. Over the years, some very inaccurate engagement ring price figures were published, some of them exceptionally high. The source of these figures is surveys. If you don’t know what the sample size was, or how representative it is, there is a decent chance that the survey results are off.