Does Living Together Really Save Money?

A new report suggests that cohabitation can be costly, especially for those without college degrees.

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We hear the money-saving argument for moving in together all the time: Sharing a home means one less rent check, shared utilities, shared groceries, and other perks of pseudo-married life. But according to a new report by the Pew Research Center, the economics of living together aren’t so clear cut, and, in fact, might contain plenty of hidden costs.

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First, some background: More unmarried couples are living together than ever before. The percentage of unmarried people between ages 30 and 44 who are cohabitating is twice what it was in the mid-1990s, Pew reports, with 7 percent of that group now doing so. And while college graduates who live together tend to be at least as well off as their peers who are either single or married, people without college degrees who live together tend to be worse off.

College grads who live together have a median household income of $106,400, compared with married college grads’ $101,160. Those who live together and don't have college degrees, however, earn $46,540 in household income, compared with the heftier $56,800 for their married peers.

What explains this difference in earning power? One reason appears to be that college-educated, married adults were more likely have more children and as a result, have one adult stay home with those children. Cohabitators without college degrees are also more likely to have children than not, which seems to decrease the chance that both partners will work. In other words, the presence of children tends to reduce household income, whether the adults hold college degrees or not.

Here’s how Pew puts it: “For the most educated, living as an unmarried couple typically is an economically productive way to combine two incomes and is a step toward marriage and childbearing. For adults without college degrees, cohabitation is more likely to be a parallel household arrangement to marriage—complete with children—but at a lower economic level than married adults enjoy.”

Moving in together also comes with a break-up risk without the legal protections of marriage, and even without children in the picture, separating finances can get complicated. Here are some questions to explore before making the big decision:

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1. Have you discussed how you will share expenses, including whether the higher earner will contribute more to household costs such as food and housing?

2. Do you know whether your partner has any credit card debt, and if so, how much?

3. If moving in means you will start sharing any major assets, such as a home or car, are the terms of that arrangement in writing, including who will pay for upkeep?

4. Have you decided how you would share jointly purchased assets and pets in the event of a breakup?

5. Do you know if you will open a shared bank account or keep all your money separate?

6. Could you name your partner's top financial goal and describe where he wants to be financially in five years?

Financial experts often recommend putting the discussion in writing. While unmarried couples with children or significant assets should probably hire a lawyer, says Sheryl Garrett, founder of the Garrett Planning Network and coauthor of Money Without Matrimony, most people can simply write a one-page document that answers the big questions: In the event of a breakup, who will stay in the apartment or house? If it's a jointly owned home, how long does the remaining person have to refinance the mortgage in his or her own name? Who keeps the car? Websites such as Nolo.com sell agreement forms that can help.

"It's like a prenup," Garrett says. She says such clarity is particularly important for unmarried couples, because "when you're not legally married, there is no divorce court." (Laws related to civil unions and domestic partnerships vary by state.)

Have you ever lived with a partner without marriage, and if so, do you think you benefited financially?

Kimberly Palmer (@alphaconsumer) is the author of the book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back.