Having a long-term view supports the ability to delay gratification and invest in the future. Having a short-term view provides no reason for delay and favors immediate gratification. These points are central to understanding marriage and cohabitation, as well as how people manage money.
A recent study
examines the way financial time-horizons are impacted by relationship transitions,
specifically, going from being single to cohabiting and from cohabiting to
being married. Barbara Fulda and Philipp Lersch conducted their study using a
large data set in Australia, motivated by this question: Is there reason to be
concerned about the future financial prospects of aging Australians in a world where
marriage is declining and cohabitation is increasing? It’s a good question, and
their study is excellent.
Their foundational assumptions were these:
·
People with longer time-horizons about finances will
save more for the future.
·
Marriage and cohabitation have implications for time-horizons,
and likely impact financial behavior.
In their study, financial planning time-horizon was measured
with a question that asked, “In planning your saving and spending, which of the
following time periods is most important to you?” The question allowed
responses ranging from “The next week” to “More than 10 years ahead,” with many
options in between. Importantly, the analyses are not about actual long-term
savings. Rather, they examined what happens to this planning variable across relationship
transitions, with the plausible argument that changes in financial horizons would
reflect something about long-term financial outcomes.
Fulda and Lersch used a variant of what economist and
sociologists call (in near worshipful tones) “fixed-effects,” which I believe
to be a variant of what psychologists call “within-subjects effects.” Such
analyses take advantage of data sets with over-time measurements from the same
individuals; in this case, to capture changes from before to after specific
transitions. While such analyses do not control for all types of selection
(such as who is on this path or that path in the first place), they do control
for other aspect of selection. For example, individuals vary in conscientiousness,
and that could impact everything of interest here. Even without conscientiousness
being measured, the fixed-effects models will control for such variance because
of how people are being compared to themselves over time. This gives new
meaning to the phrase, “control yourself.” (Researcher
humor is the best humor.) Another example of this type of thinking can be
found in a paper by Galena Rhoades, myself, and Howard Markman on changes in
relationships across the transition into cohabitation (see here). I’ll
come back to that.
Fulda and Lersch found that cohabiting individuals had
longer financial time-horizons than singles, and that financial planning
horizons increased over the transition to cohabitation. There was mixed
evidence of people’s financial horizons increasing further during cohabitation.
In contrast, financial horizons did not increase when transitioning into
marriage.
In their words, “Cohabiting individuals’ financial planning
horizons thus had already increased prior to their transition into marriage.” Further,
“we did not find convincing evidence for a change in the financial planning horizon
before and after marriage, . . ..” That is, marriage “seems to contribute
little to a longer financial planning horizon relative to cohabitation.” My
quibble is on that point.
Fulda and Lersch believe the driver of the observed effects
is the development (or establishment) of increased commitment during
cohabitation. I think that is likely correct, but I also think the matter and
meaning of the timing is more complex.
Early in the discussion of their findings, Fulda and Lersch
make an important comment.
These
results can be interpreted as extending previous research on the following two
distinct groups of cohabiters: Those who intend to marry and those who do not.
Poortman and Mills (2012) showed that the first group resembles married couples
in their partnership characteristics. In this study, we expand on this finding
and show that financial planning horizons of cohabiting couples’ who eventually
get married remain stable as a result of their high commitment to their
relationship when they transition from cohabitation into marriage.
There are different types of cohabiting unions. Some are
like marriage, many are not; some become more like marriages over time, and then
turn into marriages. That’s part of why cohabitation is a more ambiguous (and
heterogeneous) relationship status than marriage. This is likely somewhat less
true in Australia[i]
than in the United States. because of a legal system that makes cohabitation
more like marriage there. Here in the United States, anyway, cohabitation
contains very little information about commitment. Marriage plans, however,
contain a lot of information.
Sociologist Susan Brown and colleagues havedrawn attention to the fact that cohabiting couples with plans to marry
tend to be, on average, a lot like married couples (see also, this). In a related vein, but differing in an
important way, my colleague Galena Rhoades and I have found that, among couples
who end up marrying, those who started
cohabiting only after having clear marriage plans (such as after engagement
or who move in together only after
marrying) tend to do better in marriage than those who had not decided the big question
about the future beforehand (for more on those studies, see here).
Deciding you want a V8 ahead of time
beats “I coulda had a V8” while already holding something else. (Want to take a
trip through memory lane on that? Here, knock yourself out.
That’s some ancient wisdom right there.)
Furthermore, we have found cohabiting
prior to engagement or marriage is associated with asymmetrically committed
relationships, and that such asymmetries do not appear to change after
marrying. And, as I’ve written before, asymmetrical commitment is not
good.
Fulda and Lersch do not, and likely could not, examine a variable
that estimates the timing of when couples who married developed their mutual plans
to marry. I expect that a lot of the action behind what they found lies there. In
addition, while they believe that the development of commitment between
partners is the most important mechanism in play, they also do not have a
measure of that to analyze. Thus, the measure of financial horizon is sort of doing
double duty in their thinking.
Coming back to the study noted earlier
by Galena Rhoades, me, and Howard Markman, we found that commitment itself—as
in dedication to one’s partner—tends to stop increasing after the transition
into cohabitation. It levels off, and not at the particularly high level.
Taking these points all together, Fulda and Lersch do not have a way to look at
the actual timing of changes in interpersonal commitment, nor can they look at
the exact timing of when mutual plans for marriage develop. It would be interesting
to look at their research question with access to such measures.
To be clear, I have little doubt that financial planning can
change with cohabitation. However, I suspect that Fulda and Lersch’s cohabitation-transition
effects are likely, and largely, a proxy for the effect of developing marriage
plans before cohabiting or while cohabiting. Either way, the effects Fulda and Lersch
are attributing solely to cohabitation seem mostly to be marriage effects
occurring before marriage. There is nothing nearly as re-organizing for a
relationship as deciding on, and setting plans for, a life together.
Cohabitation,
Marriage, and Time Horizons
I believe marriage effects start long before a couple walks
down the aisle. Similar effects can occur without marriage if a mutual and high level of commitment emerges. However, marriage
remains the strongest cultural signal encoding such a commitment. [ii]
Sure, some institutional effects of marriage will begin with the wedding, but the
wedding day typically celebrates changes in commitment that have already
occurred.
Fulda and Lersch concluded that concerns about the long-term
financial prospects of Australians may be overblown. Bolstering this conclusion
is the fact that the laws and mores in Australia make cohabitation a near functional
equivalent to marriage. I do believe it is a different deal there compared to the
United States. However, there are reasons to think that long-term implications of
cohabitation versus marriage may still be substantial for children, even in
societies where the two statuses have become close in legal equivalence. This fact
was recently documented by Brad Wilcox and Laurie DeRose with a multi-national data
set.[iii]
Marriage may eventually lose its status as the strongest
signal of commitment to “us with a future,” but I do not think that day has yet
arrived. Until marriage disappears, marriage effects will start before
marriage.
First published to the blog of the Institute for Family Studies on 4-9-2018.
First published to the blog of the Institute for Family Studies on 4-9-2018.
[i]
As an aside, the first scholar to nail the issue of the fundamental ambiguity
of cohabitation was Jo Lindsay—an Australian research doing a qualitative
study on cohabitation first published in 2000 based on interviews in the
early 90s.
[ii]
For more on the matter of signals of commitment, I recommend: Rowthorn, R.
(2002). Marriage as a signal. In A. W. Dnes and R. Rowthorn (Eds.), The
Law and Economics of Marriage and Divorce (pp. 132 - 156). New York: Cambridge University Press.; Nock,
S.L. (2009). The Growing Importance of
Marriage in America. In H. E. Peters and
C. M. Kamp Dush (Eds.), Marriage
and Family: Perspectives and Complexities (pp. 302-324). New York: Columbia
University Press.; Stanley, S. M., Rhoades, G. K., & Whitton, S. W. (2010).
Commitment:
Functions, formation, and the securing of romantic attachment. Journal of
Family Theory and Review, 2, 243-257.
[iii] Wilcox and DeRose found a
consistent and seemingly large difference in family stability for children of
married versus cohabiting couples in many European countries; countries where
cohabitation with children has legal characteristics similar to marriage. The
larger story here is constantly unfolding into the future, but such findings
suggest that marriage still represents a different commitment to the future
than cohabitation.
