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Having wealth is essential in order to weather financial hardships like an unexpected medical expense or a job loss. For many families, building wealth can be difficult or impossible when there are credit card bills, student loan debt, rent or mortgage payments due every month, with little or no money leftover to save and invest.
Wealth can be defined as a family’s assets minus their liabilities. Your assets can include the money you have in your savings and checking accounts, your retirement savings or the home and/or car you own. Your liabilities are your debts, including a mortgage, car note, credit card balance and/or student loan debt.
In 2021, the total net worth of U.S. households grew as the S&P 500 hit record-highs and home prices surged. The total net worth of U.S. households increased 1.7% in the third quarter of 2021, according to a recent Federal Reserve Report.
However, not all U.S. households experienced gains in wealth through the stock market or real estate investments. Only about one-half of Americans have some type of investment in the market, typically through employer-sponsored retirement accounts like 401(k)s. Rising real estate prices coupled with stagnant wages are pushing many out of the housing market, making it increasingly difficult for families to build wealth.
The Aspen Institute recently released a report examining the barriers that low and middle income families face when building wealth. Below, Select digs into the reports findings on the types of assets that make up the wealth of families across the income spectrum, and we offer some advice on how you can get started building your own wealth.
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How assets are distributed across different wealth levels
Researchers at the Aspen Institute looked at Federal Reserve data from the 2019 Survey of Consumer Finances and found the kinds of assets households of different wealth levels hold.
First wealth decile (0-9.9%): car ($7,700) and checking/savings accounts ($1,250)
Second wealth decile (10-19.9%): car ($1,972) and checking/savings accounts ($500) (Note: The second decile households have lower asset values than first decile households because second decile families have less debt. As a result, the second decile households have a higher net worth.)
Third wealth decile (20-29.9%): car ($8,700) and checking/…….