NORTH BERGEN, N.J. — John Freed remembers when he was young and single. He would go out with friends and spend money without thinking about the future.
"I was running around and having a good time," he says. "Then, one day, you wake up. You think, 'Enough of this nonsense. I don't want to wake up alone. I want someone in the house with me.’ ”
Freed, who is the owner of a financial services consulting firm in North Bergen, N.J., married in 1994. He discovered that marriage was about more than love and companionship — it also helped his financial net worth.
This wouldn't surprise Charles Murray, a scholar at the American Enterprise Institute and the author of "Coming Apart: The State of White America, 1960-2010." There was a time, Murray says, back in the 19th and early 20th centuries when marriage took things like finances into account.
"People looked upon marriage as only partly connected to love," he says.
Marriage was accepted as being multifaceted — a vehicle for raising children, a broad commitment to the community and a way to increase economic success.
"Marriage has been increasingly seen in narrower terms," Murray says. "It is epitomized by marriage vows using the phrase 'For as long as we both shall love.’ ”
But if people's perceptions of the purposes of marriage have contracted, the reality of marriage's broad influence has not. A research survey report by Alex Roberts at the Institute for American Values in 2010 found the economic impact of marriage is huge — increasing net worth by as much as 600 percent.
"(T)hose who became and stayed married tended to have much higher personal net worth than their peers," the report said, looking at, among other studies, a 1999 paper, “Marriage, Assets, and Savings” by Joseph Lupton and James P. Smith. "Being or becoming single had the opposite effect."
"The point people miss," Roberts, now a doctoral student in public policy at Ohio State University, says, "is that marriage is a tremendous wealth building institution."
Yet, according to a 2010 Pew Research Center survey, only 31 percent of Americans say financial stability is a very important reason to marry.
Growing family wealth
"People have basically erased every other function of marriage from their thinking about the institution," says Kay S. Hymowitz, William E. Simon fellow at the Manhattan Institute and a contributing editor for City Journal. "They imagine it only as this very intense relationship between two adults, and it is largely an emotional and psychological arrangement. They forget how important these other functions are."
Hymowitz says marriage puts together two people who are not just making a pact to stay together as husband and wife, but are also promising to build a life together. And building a life together means financial planning and saving.
The Institute for American Values report showed that singles who got married increased their household incomes by about 50 to 100 percent within five years.
A large part of this may be due to "selection bias." Barbara Dafoe Whitehead, director of the John Templeton Center for Thrift and Generosity at the Institute for American Values, explains that people who select marriage may have other personality aspects that improve finances. They may be better educated. For example, a 2010 Pew Research Center survey found there was a 16 percentage point gap in marriage rates between college graduates (64 percent) and people with a high school diploma or less (48 percent).
Quite simply, the people who are likely to choose marriage could also be the people who are likely to be more careful with their finances.
But that isn't the whole story. It may explain why incomes increase so much after marriage, but the Lupton and Smith study also showed that singles who married increased their net worths by 400 to 600 percent within five years. Married households had about double the income of the divorced and never-married, but four times or more the net worth.
"Marriage changes behavior," Whitehead says.
It helps people be responsible to each other — and to their children. It helps them focus more on the future.
When Freed "woke up" at age 37 and tied the knot, everything changed in his life. He and his wife paid off student loan debts and saved money for a down payment on a house. They bought a home and two rentals in North Bergen, N.J., which provided not just a nice place for them to live, but provided rental income.
"When you get married, you start to think," says Freed. "You have a family. You buy a house. You start being more responsible. … When you have a family it is easier to focus and prioritize things. You think more about the bigger picture."
Part of the bigger picture for the Freeds was having a baby girl.
Whitehead says having children is one of the big reasons people's views on personal finance change within marriage.
"For couples who are married and have children, they become personally responsible for new lives," she says. "It encourages them to think about what lies ahead — such as education — and how to save and prepare for that."
It might be easy to think that merely living together would bring some of the same economies of scale that a marriage does. The Institute for American Values report, however, found that in cohabitation, partners are not typically financially responsible to each other and instead spend as individuals, and as they please.
Whitehead says people who live together keep their finances separate and don't pool their resources — one of the main financial advantages married couples enjoy for building wealth. The tentative nature of the relationship doesn't have the partners planning and saving for things such as retirement together.
Whitehead also says relatives are not as involved in the lives of people who cohabit as they are if they are married. There is a difference between helping out a son-in-law who lost a job versus helping out a daughter's boyfriend.
Charles Murray says when upper-middle-class couples cohabitate, they may have higher joint incomes and be more apt to pool resources, but seldom have children until they decide to marry. Working class people who live together are another story, he says. "When a (working-class) woman shows up cohabitating, what it means is her boyfriend is living off her income," he says. A study by Kathleen Kiernan and Valerie Estaugh in 1993 showed cohabitating mothers are almost five times more likely to have an unemployed partner than married mothers.
Preaching what they practice
Murray says marriage is doing very well among the upper middle classes, where people are college-educated. He says 84 percent of adults in that class, ages 30 to 49, are married. "That is very high," he says, "and it hasn't changed much since the 1980s."
He asks upper-middle-class college students how many come from a home with both biological parents. He once found that in a class of 18 students, 17 came from such homes.
But there is a problem.
"What they will not do in their jobs and lives is preach what they practice."
Murray said his students don't act like marriage is a value that should be shared with others. "They won't treat it as superior," Murray says.
Instead, they talk about other family structures as being equally valid and effective as two-parent families.
Hymowitz of the Manhattan Institute says this impacts the possibility of change. "They are not willing to say marriage is better for us as a society," she says. "If you can't get the elites to do that, what kinds of policies can be enacted? … There is so much resistance."
But Hymowitz is somewhat optimistic. "Surveys suggest that the large majority of young people want to get married some day," she says, "and believe in marriage as an aspiration. We need to enrich their understanding of what marriage is."
Sixty-one percent of men and women who have never married say they would like to get married, according to a 2010 Pew Research Center survey. Only 12 percent say they do not want to marry, and 27 percent are not sure.
Freed didn't get married until he was in his mid-thirties, but now with a 15-year-old daughter and secure finances, says there are many things he would never have done had he not been married.
"There's always decisions you have to make along the way," Freed says. "Sometimes having someone else there can look at what you are doing and say, 'Wait a minute, there is a problem here' or 'Have you considered that?' Sometimes two heads are better than one. And it's helped. Sometimes she sees things I don't see and I see things she doesn't see. And we collaborate and work together, and we've done reasonably well as a result, I think."