Financial Security is A Hurdle for Millennials

Financial security is a significant hurdle for young adults who want to marry, but many Milllenials – the generation born between roughly 1981 and 1998 — put the cart before the horse when it comes to marriage and money, according to Hadley Heath Manning, director of health policy at the Independent Women’s Forum.

Today Millenials delay marriage, and cite poor finances as the reason; ironically, however, marriage itself can provide financial security when couples marry life-long with the right partner, according to Ms. Manning.

Married couples have increased odds of affluence, increased chances of moving out of poor neighborhoods, increased incomes, and are more likely to avoid poverty.

Married couples have increased odds of affluence, increased chances of moving out of poor neighborhoods, increased incomes, and are more likely to avoid poverty.

In March, The Pew Research Center released a new report on Millennials and marriage, stating, in part: “Most unmarried Millennials (69 percent) say they would like to marry, but many, especially those with lower levels of income and education, lack what they deem to be a necessary prerequisite — a solid economic foundation.” Young adults today see marriage as an accomplishment rather than a journey — the capstone that says, “I’ve made it.” Against this, some conservative commentators observe that the idea that someone must be economically matured person before marriage is misguided because marriage as a lifelong partnership where the spouses shape each other and change and develop together, often realizing potential they would not otherwise.

Just 26 percent of the Millennial generation is married, according to Pew. When they were the age that Millennials are now, 36 percent of Generation X, 48 percent of Baby Boomers and 65 percent of the members of the Silent Generation had walked down the aisle.

When it comes to money, marriage can provide stability and economies of scale that aren’t as accessible for singles. Married couples have increased odds of affluence, increased chances of moving out of poor neighborhoods, increased incomes, and are more likely to avoid poverty. Tellingly, fully half of Millennials (51percent) say they do not believe there will be any money for them in the Social Security system by the time they are ready to retire, and an additional 39 percent say the system will provide reduced retirement benefits. Just 6 percent expect to receive Social Security benefits at levels enjoyed by current retirees.

Millennials are the first generation in the modern era to have crushing levels of debt (mostly student loans), poverty and unemployment, and lower levels of wealth and personal income than their two immediate predecessor generations (Gen Xers and Boomers) had at the same stage of their lives. Their straightened circumstances in part reflect the impact of the Great Recession (2007-2009) and in part the longer-term effects of globalization and rapid technological change on the American workforce. Median household income in the United States today remains below its 1999 peak– the longest stretch of stagnation in the modern era, and during that time income and wealth gaps have widened.

Older Millennials, many of whom entered the workforce in 2007 when the economy when the economy took its plunge, feel the impact of these macro-economic trends very hard. Not surprisingly, the new Pew Research survey finds that about seven-in-ten Americans, spanning all generations, say that today’s young adults face more economic challenges than their elders did when they were first starting out.

At the same time, fully a third of older Millennials (ages 26 to 33) have a four-year college degree or more — making them the best-educated cohort of young adults in American history. Educational attainment is highly correlated with economic success, even more so for this generation than previous ones. In an increasingly knowledge-based economy, young adults today who do not advance beyond high school face a grim future of low wages and high unemployment.

However, the new generation of college graduates also has their own economic burdens. They enter adulthood with record levels of student debt: Two-thirds of recent bachelor’s degree recipients have outstanding student loans, with an average debt of about $27,000. Two decades ago, only half of recent graduates had college debt, and the average was $15,000.

The economic hardships of young adults may be one reason that so many have been slow to marry. The median age at first marriage is now the highest in modern history — 29 for men and 27 for women. In contrast to the patterns of the past, when adults in all socio-economic groups married at roughly the same rate, marriage today is more prevalent among those with higher incomes and more education.

Perhaps because of their slow journey to marriage, Millennials lead all generations in the share of out-of-wedlock births. In 2012, 47 percent of births to women in the Millennial generation were non-marital, compared with 21 percent among older women. Some of this gap reflects a lifecycle effect — older women have always been less likely to give birth outside of marriage. But the gap is also driven by a shift in behaviors in recent decades. In 1996, when Gen Xers were about the same age that Millennials were in 2012, just 35% of births to that generation’s mothers were outside of marriage (compared with 15% among older women in 1996).

Millennials join their elders in disapproving of this trend. About six-in-ten adults in all four generations say that more children being raised by a single parent is bad for society; this is the most negative evaluation by the public of any of the changes in family structure tested in the Pew Research survey.

Millennial women are more likely than their female predecessors to have higher levels of education and higher earning potential.  Combining two one-income households into one two-income household means Millennial couples can reduce their overhead cost of living and improve their ability to pay down debt or even begin to save.

Marriage also wards against single parenthood. Millennials are not delaying sexual activity as late as they are marriage. According to Pew, 47 percent of births to Millennial women are non-marital, about double the rate of previous generations. And according to the Census Bureau, about 45 percent of single-mother households live in poverty compared to 13 percent of married households. Millennials would do well to avoid single parenthood. Sharing a household is financially beneficial for childless married couples, but it’s even more critical for those with children.

Young adults who are serious about their relationships should see marriage as a bedrock foundation for future financial success, not a finish line. A lack of material wealth should not be a reason, or an excuse, for avoiding marriage.

There are, of course, important caveats to this argument.  Financial insecurity comes in various strains.  Sometimes it is a symptom of “just getting started” – youth, inexperience, and an accompanying low income. These circumstances can change and improve over time, and often improve faster when two people work together. Sometimes, however, bad finances are a symptom of irresponsible behavior. It’s important to discern whether partners have the same values and expectations when it comes to money, and practice good money management, like balancing the budget and saving for a rainy day.

Furthermore, some studies show that delaying marriage at least until partners are finished with their education is beneficial to their future earnings. Couples should not marry for financial security alone, but they also shouldn’t let less-than-perfect bank accounts stop them from marrying. Millennial who avoid marriage because they lack a golden nest egg may be feeding a self-perpetuating cycle. Bottom line: Marriage is the solid economic foundation we lack.

Marriage can have a great return on investment, but only if it is a long-term, not short-term.  Divorce can have terrible financial consequences.

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