Parental financial assistance at the marriage of a child is a time honored tradition dating back to the time when a dowry was common place.
Times and customs have changed but the desire, commitment and “obligation” of parental help has not. With couples marrying later the bride and groom often bear more of the cost of their wedding. Regardless of the level of financial support or whether your child is the bride or the groom some degree of support is likely.
The type of investment you choose should be based on the length of time the money will be invested and your tolerance for risk. Another consideration should be the existence of a substitute asset.
Here are some rules of thumb:
• If the date you are planning for is less tan seven years away you should consider avoiding stocks unless you are presented with a buying opportunity where the market has sold off dramatically such as was the case early in 2009.
• If you are not investing in stocks then you should consider bond funds unless interest rates are rising in which case you could look act individual bonds or cash.
• In a perfect world you should prepare for multiple needs at the same time. They would be your own retirement, children’s college and money for a child’s wedding.