How much should I spend on wedding favor gifts?

My friend told me that it is a rule that one should spend at least 3% of the total budget of the wedding on wedding favor gifts. I am low on cash and I think I would not be able to spend this much amount on the favor gifts. Do you think it will look bad if I will not spend this much of amount? Is it compulsory to spend this amount? Will my guest come to know if I will give them cheap favors?

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