Net worth can be defined as the total value of assets you own, considering the liabilities and debts. It is the value of all the non-financial and financial assets owned by an individual or institution minus the value of all its outstanding debts. In simple terms, net worth is the difference between what you own and what you owe. Net worths can either be positive or negative, depending on the value of assets and liabilities. Positive net worth is where the assets outweigh the liabilities. The inverse is negative. Assets consist of investments, bank savings, retirement funds, land, etc. Liabilities consist of mortgage, loans, credit card debt, student loans, and all other debts someone owes. Net worths are rarely constant and stagnant; they keep fluctuating, and in the majority of cases, your net worth grows as you age.
In this article, we shall discuss the average net worth of Americans. The data is grouped into different classes such as age, race, level of education, family structure, etc.
As of 2019, according to the data released by the Federal Reserve, all American families’ average was $746,820, and the median net worth was $121,760.
Average Net Worth by Age
Your age has a direct correlation with your net worth. There’s a common trend in people building and accumulating wealth as they age. According to the recent financial analysis, the average net worth by age for Americans is $76,340 for those under age 35 (Average net worth at 30 is around $ 70,000.) A net worth of $437,770 for those ages 35 to 44 (The average net worth at 40 is estimated to be $400,000.) $833,790 for those ages 45 to 54 (The average net worth at 50 is $800,000.); $1,176,520 for those ages 55 to 64, $1,215,920 for those ages 65 to 74 and $958,450 for those age 75 and above. However, this interpretation is skewed by the few extremely wealthy individuals. It is also important to note that as people age, their net worth tends to increase, so older Americans generally have a higher net worth than the younger cohort. The average net worth at retirement is $1,217,700.
Level of Education
An increase in the level of education is proportional to the increase in net worth. Colleges have a payoff in terms of net worth. Those with college degrees have an average net worth ($1,516,910) which is more than nine times that of the typical American who doesn’t have a diploma from high school and about four times superior to someone who never graduated from college. While higher education can be costly in the short term, it remains a long-term investment.
Where do You Live?
Where you stay correlates with how much you are worth. Although living in the cities has its downsides, such as higher costs of living, city residents command more wealth than their counterparts who live outside the cities. The same principle applies to life in urban and rural America. Average data indicates that the typical American in a metropolitan area has a net worth of almost three times that of a rural American. This can partially be attributed to how real estate in major cities and towns is of higher value, contributing to urban America’s higher net worth. People living in urban areas have an estimated net worth of $806,400, while the residents in rural areas command a net worth of $324,800.
A key driver in the disparity of wealth in rural and urban America is job opportunities and income. Well-paying jobs are no longer available in rural areas. The available few cannot out-compete the sheer number of quality high paying jobs in urban America.
Race & Ethnicity
The race is also a confounding factor when it comes to net worth. There exists a racial wealth gap in America. For instance, the average Black and Latino families still have a net much smaller when compared to the average white family. White families have the highest median and mean family wealth; $188,200 and $983,400, respectively; which is more than 15% of the average black American family. The intergenerational transmission of wealth can partially explain this disparity. White families hold more wealth relatively as they are more.
Wealth-holding is relatively high among white families as they are more likely to have received an inheritance at some point in their lives.
Howe Ownership or No?
Real estate and homeownership are some of the biggest drivers of one’s net worth. In America, citizens owning a home have an estimated net worth that is ten times higher than that of a typical American with no homeownership status. Homeownership is directly correlated with higher net worth. Homeowners have an average net worth of $1,099,070 that is more than ten times higher than those who don’t own homes ($95,560).
Marital Status & Personal Life
The family structure also tends to dictate net worth in America. It has been noted that couples are financially wealthier than their single counterparts. This can be explained by their ability and leeway to share the expenses. This is further reinforced because even couples with dependents still have a higher average net worth than single people with no children.
Common challenges encountered when calculating one’s net worth include; working with rough estimates due to failing to assign accurate values to the assets. There are still debates on whether personal residences should be classified as an asset when calculating net worth. There are finance experts who agree on their inclusion, while others do disagree.
How Can You Increase Your Net Worth?
There are a variety of ways in which you can improve your financial status. These include; establishing an investment opportunity as early as now, maximizing your retirement savings, getting smart with your finances, and many other ways.
Net worths are a peep into someone’s financial life. It is treated as a financial report card tracking down your financial activities. It allows you to know where you stand financially, after which you will adjust accordingly by being more mindful of your spending, better prepared to make sound financial decisions, and more likely to achieve your short-term and long-term financial goals.