Financial Benefits to Marriage

From the Wall Street Journal:

A walk down the aisle can be a route to greater wealth and prosperity for couples in the U.S. Married people have higher net worths and are more likely to be homeowners than their unmarried counterparts their age are.  

The mystery, though, is why cohabitating but unmarried couples struggle to build wealth in the same way. As of 2019, the median net worth for cohabiting couples age 25 to 34 was $17,372, a quarter that of the $68,210 for married couples of that same age range, according to data from the Federal Reserve Bank of St. Louis. For singles it is $7,341.

The wealth gap between partnered and married couples is larger than one might expect, said Ana Kent, a senior researcher at the St. Louis Fed. “It’s so intriguing,” she said.

Over the past two decades, Americans are moving in together at higher rates, according to data from Pew Research Center. The share of U.S. adults who are currently married steadily declined from close to 60% in the 1990s to under half in 2019, according to Pew. Over the same period, the share of adults age 18 to 44 living with a partner climbed to 59%. 

Many young couples now approach marriage as a “capstone” event, said Andrew Cherlin, professor emeritus of sociology and public policy at Johns Hopkins University, who studies marriage. 

“If you build an arch, the cornerstone is the first piece you put in and the capstone is the last,” he said. “What this means is people see an economic bar they need to clear before they get married. Couples wait until they have good jobs, a car that won’t break down, maybe even a house. Then, they get married.”

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While there are legal and tax benefits to marriage, research suggests the financial security and long-term mind-set of those who tie the knot may also be a powerful driver of wealth. More married couples pool their money—such as sharing savings accounts and investing together—to achieve certain goals, Ms. Kent said. Cohabiting couples are less likely to combine finances and investments.

Working with two incomes and combining their investments to maximize compound interest can significantly increase a couple’s financial prospects, said Emily Garbinsky, associate professor of marketing at Cornell University, who has studied couples’ financial behavior. Simply put, married people may be more likely to be on the same page financially, she said.

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