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The Urban Institute has issued a report stating the millennial generation will have the lowest rates of marriage by age 40 than any previous generation. What does that mean for their finances?

Editor's note: This article originally ran on Consumerism Commentary. It has been reprinted here with permission.

The Urban Institute has issued a report stating the millennial generation will have the lowest rates of marriage by age 40 than any previous generation. The report contemplates a variety of reasons for this shift, including a reduced role of marriage in a family household and the effects of the latest recession. But what does this mean for the financial future of today’s young mostly-singles?

Marriage certainly affects a couple’s finances. Laws make certain effects unavoidable. Nine states have community-property laws, and in those states any money earned by either spouse or any property bought by either spouse from money earned while married is owned equally by both spouses. But as a whole, this law doesn’t change the financial situation of the couple. If between two people cohabiting, the combined annual income is $150,000, that law is in effect whether they’re married and whether they combine their bank accounts.

There may be some subtle differences. A nonmarried couple may need to buy separate health insurance, despite the fact that more frequently, employers consider nonmarried couples “domestic partnerships” and cover a domestic partner, regardless of the sex of the partner. Yet, if a partner is not covered automatically, health insurance for the family could be more expensive.

That, in itself, does not seem a strong enough reason for a researcher to make this argument, as one does in a CNNMoney article about the Urban Institute’s report:

“The evidence shows that getting married increases wealth and income,” said Pamela Smock, a sociology professor at the University of Michigan.

Why would the act of getting married cause an increase of wealth and income? It may be true that wealthier people and those with higher incomes are more likely to get married in the first place, but that’s not what this researcher is saying. She is saying that marriage, independent of all other variables, not only correlates to higher wealth and income, but is a direct cause. I looked at the researcher’s list of recent publications and did not see any articles or books focusing on wealth and income, any in which she has researched cohabitation extensively.

The truth is actually the opposite of Smock's contention: Marriage has a detrimental effect on an individual’s long-term wealth. Here are some of the more obvious reasons.

Couples who get married are more likely to have weddings. Weddings can be, but aren’t always, expensive events. Even otherwise frugal people are driven to spend more money than they normally would to make a memory for themselves and their families that matches the dreams they’ve had. Even with the best do-it-yourself wedding efforts, couples find weddings to be significant expenses that take resources away from other priorities, and, in the worst case, pile onto already unmanageable debt.

A couple who decide not to get married can certainly opt to hold a ceremony to celebrate their togetherness, bringing friends and family together for a joyous occasion, but many do not. And if a lack of financial resources is one of the reasons to indefinitely delay a wedding, it wouldn’t make sense to hold a similar celebration for cohabitation.

I see nothing wrong with weddings, but I’d just like to encourage people to continue to think about their future financial security while planning them.

Couples who get married are more likely to have children. More and more, I’m seeing friends and family and their spouses opt to skip having children, and this reflects a national trend. It must be related to what I’ve already mentioned in this article — as fewer millennials get married before age 40, fewer choose to have children, even though there has been an increase of children born to couples who are not married.

Children are wonderful, and that’s what you’ll discover if you have children or if you ask any parent (who’s not dealing with a temper tantrum at that particular moment). But that doesn’t change the fact that children are expensive. The cost to raise a child to the age of 18 can be $200,000 or more — and for most middle-class Americans, that’s going to be a gross understatement. Add any kind of prevalent developmental disability, like autism, and that total will skyrocket. Then double your estimate if you plan to have two children.

Is it our duty to populate the world? According to some belief systems, it is. But the choice to have children has a direct, measurable effect on the financial situation of a couple over the long term, and it’s not positive. That’s not to say it’s a bad decision to have children; not all decisions in life are made based on financial outcome. In fact, the same people who propose that the value of an education should be based solely on the return on investment seem to forget their dedication to that approach when you ask them whether their children have provided them with a good ROI.

Couples who get married are more likely to get divorced. This, and the other points above, should be obvious. No marriage means no possibility for divorce, and divorces are notoriously devastating for a couple’s finances, particularly when a couple has gotten into the habit of having only one adult bringing in an income. Add a child (or two or seven) to the mix, and a divorce can drive people to bankruptcy.

Unmarried households may be more transient, less permanent, but that doesn’t hold true for every couple. But overall, without marriage and an intertwining of finances, unraveling a relationship doesn’t have to mean devastating financial consequences. There tend to be fewer arguments over property, because all has typically been owned by one partner or the other.

So with these facts in mind, where is the evidence that marriage increases wealth and income?

One potential reason a marriage might increase wealth and income comes from its status as a rite of passage. In addition to how marriage changes society, many people feel it is a necessary marker along life’s path, one that indicates a move toward an important stage of adulthood. Marriage, as well as child rearing, forces people to grow up. Maturing as an adult also means taking a more considered approach toward family finances. The stakes in a marriage are higher. One has more people to take care of, officially, and thus one is inclined to work harder at providing for the family.

Other people see this. It’s reflected in the attitude that one displays, consciously or not. Married men are more likely to get raises, promotions and job offers, but married women are less likely to be awarded the same. Although this situation in society is changing, among married couples, men are still more likely to have a job than women. These statistics play out in such a way that being married is good for a family’s economy.

This doesn’t necessarily mean that marriage automatically makes a man more employable or have a higher earning potential; it could be that some men are both more likely to get married and more likely to be more employable, with some other variable having the biggest influence. But studies have shown that all other things being equal, if a supervisor infers that a man is married, he is more likely to be chosen for a positive career decision than if there is no inference.

For anyone to be able to claim that getting married increases wealth and income, this employment bias would need to override the financial detriments listed above.

Here’s how survivorship bias plays into this study and will help make it seem as if marriage is, in fact, better for a family’s wealth and income: Couples who are divorced and remain so, and are therefore no longer married, disappear from the statistics. In other words, all the financial devastation brought on by divorce is missing from the data. This filter allows an interpretation that could be far from the truth. Even though most people getting divorced do, in fact, remarry, that marriage might occur after divorce-related financial problems, making that second marriage appear to be a good financial move.

As with any other research pertaining to families and finances, we all want vindication that we’ve made good choices. So it’s somewhat natural for married people to seek out data that validates the idea that marriage is a good financial move. College graduates want to believe that attending college (and attending their specific type of college, whether it’s Ivy League or a community college) was a good idea. We all seek out confirmation that the choices we make are good.

The path not traveled will always remain a hypothetical, though. Let’s all feel good about our choices, because there’s always the possibility that life and finances would have been much worse had the decision been different.

If you are or were married, has your marriage definitely resulted in more wealth and income? If you're married or not married, has the prospect for a better financial life influenced your decision regarding marriage?

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the Internet since 1995 and has been building online communities since 1991.