Moving In Together Doesn’t Match the Financial Benefits of Marriage, but Why?
Married couples are four times as wealthy as unmarried couples who live together
Married couples are four times as wealthy as unmarried couples who live together
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.”
Melissa Mowery, a 30-year-old communications manager in Asheville, N.C., has been with her boyfriend for five years and living together for nearly four. The two don’t share a joint bank account, but they split the cost of rent and other bills. Even so, Ms. Mowery said she can’t make sense of the financial gap between her relationship and that of married couples.
“We’re already saving a lot of money and splitting the cost on most things,” she said. “I don’t understand how married couples are accumulating wealth in a way we’re not doing.”
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 maximise 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 behaviour. Simply put, married people may be more likely to be on the same page financially, she said.
“Married people may be much more likely to have these conversations around what goals they have for their financial future,” she said. “There seems to be something very special and unique about deciding to share finances.”
Unmarried couples may be less willing to commingle their money, said Prof. Garbinsky.
“Our money, our income, represents a huge part of who we are,” she said. “[Sharing] that can be scary for people, so they tend to be very protective.”
Both married and unmarried couples who do pool finances also experience greater relationship satisfaction and may even stay together for longer, Prof. Garbinsky said.
Housing is one of the biggest factors in establishing a couple’s wealth. Compared with single people and cohabiting couples, married couples hold a larger concentration of housing wealth, according to data from the St. Louis Fed.
“Most of my married friends have bought a house,” Ms. Mowery said, noting high housing costs in her area. “I just don’t know how they did it. Everyone talks about how when you get married, you accumulate wealth but I don’t know what that means.”
In the current hyper competitive housing market, as smaller, more affordable starter homes vanish and housing affordability declines, single people and cohabiting couples are often at a disadvantage.
“These [housing] prices are so high that you really need pooled resources to be competitive in some of these markets,” said Lowell Ricketts, a data scientist at the St. Louis Fed.
Socioeconomic factors play a role in the difference between married and partnered wealth; the higher your income, the likelier it is that you’ll marry, a 2017 report by the American Enterprise Institute found.
Plotting a path forward as a couple without much money isn’t as easy as getting hitched and suddenly seeing your wealth grow, Prof. Cherlin said.
“Someone looking at the data would say, ‘Well, these married people are much more successful than their cohabiting people. If these people would just get married, they’ll do better,’” he said. “Whether or not there is truth in that, people don’t tend to believe in it anymore. People who aren’t doing well financially don’t see a clear path to financial success.”
Marriage rates are lower among Black and Latino groups, and those same households of similar ages held far less wealth than their white counterparts, whether married or partnered. Family structure also influences the overall net worth of a household. Partnered couples with young children tend to have less wealth than partnered couples without children.
Some cohabitating couples are refashioning their financial goals. Instead of buying a house, Ms. Mowery and her partner recently looked into a house share that would allow them to spend part of the year working from Belize. They have discussed getting married, although haven’t made plans to do so any time soon.
“I care a little bit less than I thought I would about marriage,” she said. “Once you start living together, it almost feels like you made that commitment.”
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Sales of the cosmetic product are a bright spot in an otherwise bleak discretionary-goods environment
Masks off, lipstick index on.
In a gloomy economy, consumers might cut back on other discretionary purchases but will keep shelling out for small luxuries such as lipstick—or so goes the theory. “When lipstick sales go up, people don’t want to buy dresses,” Leonard Lauder, then-chairman of Estée Lauder who is widely credited for coming up with the so-called “lipstick index,” told The Wall Street Journal in 2001.
L’Oréal Chief Executive Nicolas Hieronimus called this out during the company’s earnings call in October, noting that a luxury lipstick or mascara is only €30, making it an “affordable treat.” Sales at L’Oréal rose 9.1% in the third quarter compared with a year earlier despite slower sales in China due to Covid-related lockdowns. Coty, maker of CoverGirl makeup, said organic sales grew 9% over the same period.
Beauty sales have also been a rare bright spot for retailers: Target said beauty category sales grew roughly 15% in its quarter ended Oct. 29 compared with a year earlier, with Ulta Beauty shops in Target tripling their total sales volume over that period.
While Macy’s namesake stores saw comparable-store sales decline last quarter, its beauty-focused Bluemercury chain saw same-store sales grow 14% last quarter compared with a year earlier. Kohl’s locations with Sephora are outperforming the rest of the department-store chain.
Of the 14 discretionary categories that market research firm NPD Group tracks, prestige beauty—products you might find at a department store or a Sephora—is the only category that is seeing unit sales growth year to date. And lipstick, which suffered during the masked-up pandemic, is making up for lost time.
Lipstick sales have grown 37% through October this year compared with a year earlier, according to Larissa Jensen, beauty industry analyst at NPD Group. That is an acceleration from the 31% growth seen during the same period last year. Lip product is the only major category within prestige beauty where sales are actually up compared with pre-pandemic levels, according to Ms. Jensen.
Cosmetic companies have also called out strong sales in fragrances, calling it the “fragrance index.” Demand has been so robust that there is an industrywide fragrance component shortage, Coty said in a press release announcing third-quarter earnings earlier this month. CEO Sue Nabi said during the call that Coty hasn’t seen any kind of trade-down or slowdown, also noting that consumers are shifting away from gifting perfume to buying it for themselves.
“A big piece of it is just a shift in what wellness means to consumers,” NPD Group’s Ms. Jensen said. “Beauty is one of the few industries that are positioned to meet [consumers’] emotional need. It makes them feel good.”
While the lipstick effect could be observed in the recession in the early 2000s, that wasn’t the case during the 2007-09 recession, during which lipstick sales declined alongside other discretionary purchases. Part of this might have had to do with category-specific dynamics.
There was a lot of newness in the cosmetic industry in 2001, including lip gloss, a relatively nascent category back then. That tailwind simply wasn’t there starting in 2008, though nail polish turned out to be consumers’ small indulgence of choice in that period. This time around, consumers may be eager to show off a part of their face that was hidden behind a mask for so long during the pandemic.
In an otherwise bleak environment for companies selling discretionary goods, those in the business of selling cosmetics look well poised to come out of the holiday season looking freshened up.
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