Opportunity and Ownership: Facts

Publications : Facts

More than a quarter of U.S. families are in the bottom 40 percent of both the net worth and the income distributions. For these families, neither assets nor income offers much protection against financial shocks. This fact sheet describes the characteristics of these families. Low-asset low-income families tend to be younger, single, less educated, in poorer health, and minority.

Using data from the Making Connections Cross-site Survey, this fact finds that, on average, families would save about $276 per month in mortgage payments with a new five percent interest rate, 30-year mortgage. Lower interest rates both increase housing affordability and allow families to accumulate equity in their homes more quickly. This fact highlights the importance of improving financial literacy, information and education around mortgage pricing, and of helping families build good credit. Families included in the data live in selected low-income neighborhoods in six cities and were surveyed as part of the Annie E. Casey Foundation's Making Connections initiative.

For households headed by persons with disabilities, savings can provide near-term protection against hardship. Analysis of longitudinal data from the 2001 panel of the Survey of Income and Program Participation indicates that households with $2,000 or more in liquid assets (interest-earning assets held at financial institutions) are better able to avoid subsequent hardships such as forgone doctor visits and missed utility payments, compared to those with smaller (or no) asset holdings. This evidence has implications for possible increases in the resource limits for the Supplemental Security Income (SSI) program, now $2,000 for individuals and $3,000 for couples.

Using the 2007 Survey of Consumer finances, this Fact finds large differences in the level and composition of wealth across the income distribution. Before the recession, working-age families in the bottom-quintile had median net worth of $4,300 and held the majority of their wealth in housing. Top-quintile families had median net worth of over $500,000 and held less than one-quarter of their wealth in housing. With few liquid assets to draw from in case of a financial emergency, bottom-quintile families were in a vulnerable position at the onset of the recession.

Many commentators have worried about the low savings rates and high debt levels of American families. Does this picture of unbridled consumption and low asset accumulation fit the American family? Did declines in 2008-2009 house prices, stocks, and bonds reinforce stagnating wealth or offset previous growth in wealth? Using data from the 1989, 1998, and 2007 Surveys of Consumer Finances (SCF) to replicate family experiences over the life cycle by following age cohorts, this fact sheet shows that from 1989 to 2007 American families were accumulating wealth at a healthy rate as individuals and families moved through their life cycle.