Planning Until Death Do Us Part: Partnership Status and Financial Planning Horizon
| Published date | 01 April 2018 |
| Author | Barbara E. Fulda,Philipp M. Lersch |
| DOI | http://doi.org/10.1111/jomf.12458 |
| Date | 01 April 2018 |
B E. F Chemnitz University of Technology
P M. L University of Cologne∗
Planning Until Death Do Us Part: Partnership Status
and Financial Planning Horizon
Positive economic outcomes of marriage are
often explained with a higher future orientation
of married individuals who are assumed to
plan their nances for a longer period than the
nonmarried. Using data from the Household,
Income and Labour Dynamics in Australia
Survey (2001–2014; N=4,819 individuals),
the authors provide the rst longitudinal test
of whether individuals change their nancial
planning horizons when they change their part-
nership status using xed and random effects
regressions. Results show that the nancial
planning horizon increases as individuals enter
cohabitation. No further changes in nancial
planning horizons are found when they tran-
sition into marriage. Changes in horizons are
similar for women and men. These results indi-
cate that longer nancial planning horizons
and marriage are likely outcomes of couples’
long-term commitment, which develops during
cohabitation. The symbolic and legal institution
of marriage is not additionally associated with
individual nancial planning as a dimension of
future orientation.
Marriage has been linked to positive economic
outcomes such as less poverty, more income,
Chemnitz University of Technology, Institute of Sociology,
Thueringer Weg9, 09126 Chemnitz, Germany
(barbara.fulda@soziologie.tu-chemnitz.de).
∗University of Cologne, Institute of Sociology and Social
Psychology, Greinstr.2, 50939 Cologne, Germany.
Key Words: Australian/New Zealand families, cohabitation,
family economics, longitudinal, marriage.
and more wealth (Waite, 1995). One prominent
explanation provided for these positive out-
comes is that the transition to marriage increases
the future orientation of spouses when com-
pared with the nonmarried (Knoll, Tamborini, &
Whitman, 2012). In this article, we examine
if the married are more likely than cohabiting
couples to make nancial plans for their shared
future lives and consider a longer time window
in their plans, for instance, because the marriage
contract insures both partners against a total
loss on their joint investments (Brines & Joyner,
1999). The married may then be more likely
to forgo current consumption to save, make
long-term investments, and accumulate wealth
(Wilmoth & Koso, 2002). We complement our
analysis by comparing single individuals’ nan-
cial planning horizons to cohabiting individuals.
The explanation for the positive economic
outcomes of marriage through more future
orientation has not yet been directly tested using
adequate longitudinal methods. In addition,
as the prevalence of cohabiting unions has
increased in recent decades and cohabitation
has been legally institutionalized in diverse
contexts such as Australia (the country case
of the current study), the United States, and
Western Europe (Kroeger & Smock, 2014;
Popenoe, 2009), it is important to ask whether
increased future orientation remains specic to
marriage. Alternatively, increased future orien-
tation when compared with singles could also be
a characteristic of institutionalized cohabiting
unions.
In this article, we ask if an individual’s
partnership status impacts nancial planning
Journal of Marriage and Family 80 (April 2018): 409–425 409
DOI:10.1111/jomf.12458
410 Journal of Marriage and Family
horizons, that is, the prospective time period
for which individuals plan their spending and
saving. We directly examine within-individual
changes in the nancial planning horizon result-
ing from the transitions into cohabitation and
marriage. Direct transitions from being single to
married are not considered. Thereby, we provide
knowledge on a mechanism linking individual
partnership status and economic outcomes such
as wealth in later life. We address the following
research questions: Do individuals change their
nancial planning horizon as they transition
from being single into cohabitation? Do individ-
uals change their nancial planning horizon as
they transition from cohabitation into marriage?
To answer our research questions, we used
longitudinal panel data from the Household,
Income and Labour Dynamics in Australia
(HILDA) Survey for the period 2001–2014
(N=4,819 individuals). We analyzed these data
using xed effects and random effects panel
regression models. We focused on transitions
into rst cohabitation and rst marriage because
we assumed that higher order unions might be
substantially different because of prior partner-
ship experiences. By analyzing both transitions,
we were able to observe how individual nancial
planning horizons change over time as individu-
als move through different partnership statuses.
Beyond testing a specic mechanism to
understand the relationship between partnership
status and economic outcomes, the current
study contributes to our general knowledge
about nancial planning. Previous research
shows that the length of the nancial planning
horizon is positively associated with both the
likelihood of saving and being a regular saver
(Ersner-Hersheld, Garton, Ballard, Samanez-
Larkin, & Knutson, 2009; Fisher & Montalto,
2010). Those with longer nancial planning
horizons were found to have more retirement
savings (de Rubio, 2015). Thus, nancial plan-
ning is linked to nancial security throughout
the life course, in particular in welfare states
with lean public pension systems such as Aus-
tralia and the United States (Knoll et al., 2012).
Examining how individual partnership statuses
contribute to nancial planning also helps us
to better understand the implications of demo-
graphic shifts toward higher rates of unmarried
cohabitation and longer spells of being single.
These shifts could have serious repercussions
for aging individuals and their families with
regard to their wealth accumulation.
B
In contrast to classic economic theory such as
the life-cycle hypothesis of saving (Modigliani
& Brumberg, 1954), in which it is assumed
that individuals with perfect foresight smooth
their consumption during their complete life
courses, sociologists and psychologists high-
light the boundedness and social structuration
of individuals’ future orientation and time
horizons (Chisholm, 1999). For instance, time
horizons may be socially structured through the
class-specic experience of uncertain living con-
ditions such as unemployment. It is argued that
for those experiencing uncertainty, the future
is subjectively risky, and making long-term
plans under these conditions may be irrational
(Sørenson, 2000). In the current study, we exam-
ined the structuring inuence of partnership
statuses on time horizons and nancial planning.
Previous Empirical Evidence and Its
Limitations
Do nancial planning horizons differ between
single, cohabiting, and married individuals?
Previous empirical evidence on this question
is mixed. On one hand, cohabiting couples’
likelihood to save during the past year was
found not to be signicantly different from
married couples’ likelihood (Fisher & Montalto,
2010). This relationship also holds for saving
regularly. Saving is regarded as a proxy for
nancial planning, as more nancial planning
often leads to increased savings to meet future
nancial goals. On the other hand, Knoll et al.
(2012) provided indirect evidence for a positive
association between marriage and the individual
nancial planning horizon: Married individuals
in young adult households aged between 22 and
35 were more likely than cohabiting individuals
to perceive retirement as an important saving
goal. Being married compared to never having
been married (without explicitly distinguishing
between cohabitors and singles) was also found
to signicantly increase the odds of having a
longer nancial planning horizon (de Rubio,
2015). Dow and Jin (2013) found similar evi-
dence: They observed that living in a married
household was negatively related to having a
short nancial planning horizon when compared
with being single. They, too, did not compare
married to cohabiting individuals.
Previous evidence on the relationship
between partnership status and the nancial
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