They do it every three years. Interviewers fan out across the country, visit a cross section of American households and politely say, “Show us the money.”
I am referring, of course, to the Federal Reserve Survey of Consumer Finances. In 1995 they completed 4,299 interviews to develop a picture of how we were doing… and what we were doing… with our paychecks, investments, and borrowings. Here are some of the findings, culled from their first examination of the interviews— note that the figures are expressed in 1995 dollars but reflect actual results for 1994.
- Net Worth Rises With Age. While the median net worth of all families ( i.e., half had more, half had less) was $56,400, the median net worth for families headed by someone under 35 was only $11,400. It quadrupled to $48,500 for those 35-44, nearly doubled again to $90,500 for those 45-54, and peaked at $110,800 for those 55-64. At age 65 it started to slowly decline, reaching $95,000 for those 75 and over.
- Worth Also Rises With Income. Hardly a surprise, the more income a family has, the higher its net worth. Households with incomes under $10,000 had a median net worth of $4,800 while households with incomes over $100,000 had a median net worth of $485,900. (The figures for both are shown in the table below.)
How Net Worth Rises With Age and Income
| Age of Head | Median Net Worth | Household Income | Median Net Worth |
| less than 35 | $ 11,400 | less than $10,000 | $ 4,800 |
| 35-44 | $ 48,500 | $10,000-24,999 | $ 30,000 |
| 45-54 | $ 90,500 | $25,000-49,999 | $ 54,900 |
| 55-64 | $110,800 | $50,000-99,999 | $121,100 |
| 65-74 | $104,100 | $100,000 and more | $485,900 |
| 75 and more | $ 95,000 |
Source: Federal Reserve Bulletin, January, 1997
- We’re Dumping Fixed Income Investments and Buying Equities. A comparison of 1989 and 1995 survey figures shows that our financial assets are looming larger in our net worth… and that we are making dramatic reductions in the amount of fixed income investments we are willing to hold. The percent of net worth held in transaction accounts fell from 19.7 in 1989 to 13.5 percent in 1995. The decline in CD holdings was even more dramatic, from 10.4 percent to 5.5 percent. And our holdings in bonds fell from 11.0 percent to 5.5 percent. Stocks, mutual funds, and retirement accounts, meanwhile, all rose as a percent of net worth. While both mutual funds and retirement accounts may contain fixed income investments, industry statistics show that both areas have experienced a significant shift toward equity investments in recent years.
- We’re Still Big Time Consumers. Although we’re saving somewhat more now, it is still a fact that most Americans have more at stake in the used car market or the housing market than they have in our financial markets. Families with income of $25,000 to $49,999, for instance, had median financial assets of $12,100 compared to $7,800 in vehicles and a primary residence with a median value of $81,400. Even households with incomes over $100,000 had more at stake in the housing market than in the financial markets. (see table below.)
Houses and Cars Still Bigger Investments Than Financial Assets for Most Americans
| Household Income | Financial Assets | Vehicle | Primary Residence |
| less than $10,000 | $ 1,200 | $ 2,600 | $ 38,800 |
| $10,000-24,999 | $ 5,400 | $ 4,500 | $ 54,200 |
| $25,000-49,999 | $ 12,100 | $ 7,800 | $ 81,400 |
| $50,000-99,999 | $ 40,700 | $11,800 | $108,500 |
| $100,000 and more | $214,500 | $17,800 | $217,000 |
Source: Federal Reserve Bulletin, January 1997
- Some Families Are Drowning In An Average Sea of Debt… But Most Are Swimming Quite Well. While debt payments as a percent of income for all families averaged 15.6 percent in 1989 and 15.4 percent in 1995, indicating that consumer debt wasn’t a major problem, a closer look shows that higher income families have tended to reduce their debt burden while lower income families are committing more income to monthly payments. Median percentage of income committed to payments for $100,000 and up families declined from 13.9 percent in 1989 to 11.4 percent in 1995 but rose slightly for families with incomes between 10,000 and $99,999. ( How we’ve handled the more than $200 billion increase in consumer credit since 1994 is another matter.)
Only one big, pregnant question arises from all this: Since the figures clearly show that we continue to consume and borrow but are virtually unwilling to invest in fixed income investments, who is going to finance the debt side of our economy?
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
Photo by Pixabay
A.M. Universal, 1997