(Not) Going to the Chapel

We’ve only just begun to live
White lace and promises
A kiss for luck and we’re on our way

While you may be familiar with the Carpenters’ number-one 1970 hit “We’ve Only Just Begun,” you probably didn’t know that the song got its start as the soundtrack to a bank commercial.

Over wordless, soft-focus, close-up scenes of a young couple getting married in a California country church, the singer croons about the adventures the newlyweds have in store. The ad concludes with the couple driving off into the evening, followed by the words: “You’ve got a long way to go. We’d like to get you there. The Crocker Bank.”

The popular ad showed how important young married customers were to banks. Today, for bankers wondering when (and if) millennials will come into banks in droves, the place to start is the data on marriage. Millennials—roughly, the generation born between 1980 and 2000—are not getting married at the same pace as prior generations. In 2014, the marriage rate was 35 percent lower than in 1970. Then, nearly 80 percent of those aged 25-34 were married. Today, just about half of Americans aged 25-34—that is, the older half of the millennial generation—have married.

This sea change in marriage could dramatically change when and whether Americans engage with banks as deeply as previous generations.

Marriage on the move

One central shift is a view among millennials of marriage as a “capstone” experience. In 1970, the average age of first marriage was 21 for women and 23 for men. People married on the cusp of adulthood and grew together. Young married couples shared the experiences of going to college or grad school together, of working low-paying jobs to build a career, of living cheaply in ratty apartments to save money.

Today, the average man marries for the first time at 29 and the average woman at 27. “Culturally, young adults have increasingly come to see marriage as a ‘capstone’ rather than a ‘cornerstone’—that is, something they do after they have all their other ducks in a row, rather than a foundation for launching into adulthood and parenthood,” says a report from the National Marriage Project at the University of Virginia. This increasingly common idea posits that young people should finish their (often lengthy) higher educations, reach a high level of career achievement, experience travel and other exotic pursuits, cohabit with potential mates and become financially well-off before thinking about marriage and children.

A young adult in this mode isn’t the same kind of bank customer as his parents were. “The educated class of millennials are marrying well into their late 20s and often into their 30s and they don’t have children until their 30s or later,” says Manhattan Institute Senior Fellow Kay Hymowitz. “Banks are dealing with 30-somethings where they might previously have been dealing with 20-somethings.”

However, the affluent millennial pursuing a capstone approach to marriage will eventually make it into the bank, says Hymowitz. Millennials from working-class and less affluent backgrounds may not—ever. While the capstone marriage is a goal for young people at all levels of the socioeconomic ladder, the less affluent are more likely to have children before getting married—and that can set them up for a lifetime of catching up. And since marriage itself provides demonstrable financial benefits, remaining unmarried deprives them of further opportunities.

“Young, less educated adults are going to be in a much more precarious economic condition as a result of not marrying,” Hymowitz says, pointing out the benefits of two pooled incomes for hitting the financial milestones that banks offer. And while less educated millennials do often move in together, “cohabitors don’t tend to be as stable or committed to future planning,” she explains. “That affects their approach to buying homes— assuming they could even manage the expense.”

“This capstone model is not working well for Middle Americans,” conclude researchers at the National Marriage Project. One must ask if it’s working well at bringing these young adults into the mainstream financial services marketplace.

Why marriage matters

Millennials want to get married just as much as previous generations did. But for young people shaped by divorce and a shaky job market, marriage can seem risky. The truth is the opposite. While individual anecdotes may vary, the evidence broadly shows that marriage is a stabilizing, risk-mitigating force in people’s lives. Unfortunately, according to the Pew Research Center, only one-third of millennials believe that marriage contributes to financial stability.

Married men earn nearly one and a half times what unmarried men make, even when controlling for external factors. “The institution of marriage continues to boost men’s commitment to work and the individual economic success they enjoy,” write Brad Wilcox of the University of Virginia and Robert Lerman of the Urban Institute. Women in intact families likewise enjoy greater levels of income. “Both men and especially women enjoy higher family incomes when they get and stay married.”

Married customers tend to be better bank customers as well, being several times more likely to own a home and 30 percent more likely to apply for a mortgage than unmarried individuals. They also tend to have monthly deposit values more than 40 percent higher than those of the unmarried. Figures from Gallup show that married people spend slightly more each month than cohabiting couples—and nearly twice as much as singles. Raising children amplifies these effects. According to Jeffrey Dew, a sociologist at Utah State University, married fathers have much higher levels of personal net worth over their lifetimes than non-fathers or unmarried fathers.

If millennial bank customers are simply delaying marriage, bankers can target them with mortgage and wealth management products later than they otherwise might. At present, given the large student debt overhang and the cohort’s lower marriage rates, “they don’t have very many incentives to engage with financial institutions,” Dew says.

But “a substantial number of young people are not just putting off the landmarks of adulthood but are just not following that script at all,” says Hymowitz. If marriage is no longer part of the “life script” in your community, what does that mean for your bank?

If marriage is no longer part of the picture for millennials in your market, you may see increases in the unbanked and underbanked. According to the FDIC, only one in five married couples are unbanked or underbanked, but nearly half of female-headed unmarried households are. If marriage rates continue to decline among millennials, then reaching the unbanked will become a more important strategy for many banks.

Many observers focus on millennials’ comfort with technology, desires for authenticity and appreciation of customization when they look at the future of banking. Just as important for understanding millennials and the future of banking is understanding the role of marriage trends. And in that endeavor, we’ve only just begun.

This article originally appeared in the May/June 2016 issue of the ABA Banking Journal.

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