Your Relationship Status Affects Your Wealth
August 30, 2014 Leave a comment
Jay Zagorsky, a research scientist at Ohio State University ‘s Center for Human Resource Research,uses data involving 9,055 people who participated in the National Longitudinal Survey of Youth, which is funded primarily by the U.S. Bureau of Labor Statistics to show how people’s relationship choices affect their wealth position. The NLSY is a nationally representative survey of people in the US, conducted by Ohio State ‘s Center for Human Resource Research.
The same people are interviewed repeatedly over time, giving Zagorsky the opportunity to see how wealth changes as a result of marriage and divorce. Zagorsky used data from 13 NLSY surveys conducted between 1985 and 2000. All the respondents were between 21 and 28 years old in 1985.
People who remained single had a steady, but slow growth in wealth – from less than $2,000 at the start of the surveys up to an average of about $11,000 after 15 years.
People who got married and stayed married showed a sharp increase in wealth accumulation after marriage, growing to an average of about $43,000 by the 10th year of marriage.In fact, married people increased their wealth about 4 percent each year just as a result of being married, with all other factors held constant.
For people who married and then divorced, there was a slow build-up of wealth during the early years of marriage and then a steady decline beginning about four years before divorce. Total wealth bottomed out the year prior to divorce, to an average of about $3,500.
Divorce thus reduces a person’s wealth by about three-quarters (77 percent) compared to that of a single person, while being married almost doubles comparative wealth (93 percent).Divorce causes a decrease in wealth that is larger than just splitting a couple’s assets in half.By the same token, married people see an increase in wealth that is more than just adding the assets of two single people.
Many of these people may have separated before the divorce became official, which would help explain why wealth starts falling so early.Some people may also be working less and not trying as hard to build wealth as they have marriage troubles. Divorce is often a long and messy process, and you can see this in the four-year decline in wealth.Wealth begins climbing again in the year of the divorce, but not by much. Even a decade after divorce, the median wealth stays below $10,000.After divorce, the typical man held 2.5 times the amount of wealth held by the typical woman.
Married people benefit because two people can live more cheaply than they could separately. In addition, because two spouses can share household responsibilities, they can each produce more than if they were single.
Divorced people have a variety of costs associated with the divorce, which increases how much they spend and decreases how much they can save.
So,if you really want to increase your wealth, get married and stay married. And as divorce can devastate your wealth, be damn sure to pick the right sort of person, willing to work just as seriously as you to make your marriage work.