The recently released 2010 Survey of Consumer Finances data from the Federal Reserve Board has quantified what we knew to be true in the post-recession years: wealth levels have dropped, dramatically. The story of the average American family, however, like all averages, hides substantial variation in experiences. When we examine trends in net worth (total assets minus total debts) between 2001-2010 by family position in the income distribution, three different stories emerge.

  1. Families in the lower quintiles (bottom 40 percent) of the income distribution never saw major wealth growth. In fact, median wealth holdings for these families declined between 2001 and 2004, held fairly steady between 2004 and 2007, and then declined even more substantially between 2007 and 2010.
  2. The middle- and upper-middle-classes experienced the boom, then bust, of the housing market. Families between the 40th and 90th percentiles of the income distribution saw overall net worth rise steadily between 2001 and 2007, with rising home values contributing to much of this gain. With the burst of the housing bubble, and subsequent freefall in home values, the median household in these groups suffered major losses in overall net worth. Like families in the lower quintiles, median net worth for these families in 2010 is lower than it was in 2001.
  3. Families in the top 10 percent of the income distribution saw median net worth grow. Unlike the bottom 90% of the income distribution, the median net worth of families in the top 10% grew in each year the Federal Reserve Board conducted the Survey of Consumer Finances. Compared to other families, housing is a smaller proportion of total wealth for families in the top 10%, and their overall net worth was less affected by the rise and fall of housing prices.

In addition to major changes in net worth, the recession appears to have sharpened families’ focus on the importance of having cash on hand for emergencies. Thirty-five percent of families gave liquidity, or cash on hand, as their most important reason for saving in 2010, an increase compared to previous survey years.

Although it is a good sign that families are prioritizing savings, most families’ desired savings would still make them asset inadequate. While precautionary savings may have moved to the forefront of many families’ minds, the median desired value of savings changed little between 2007 and 2010. Among all families, the median value of the estimated amount of savings they needed for emergencies and other unexpected events was $5,000. The typical family expressed a desire to have about 1 to 2 months of income saved, while most experts suggest savings equal to at least 3, and preferably 6, months of income is desirable.

This summary provides only a glimpse of the detail on family asset and liability holdings available in the Survey of Consumer Finances. For the first time, the Federal Reserve Board has made the public data available through the University of California at Berkeley’s online Survey Documentation and Analysis tool, which facilitates exploration, manipulation, and analysis of the data.

Rebecca Tippett is a Research Associate at the University of Virginia’s Weldon Cooper Center for Public Service where she studies household economic well-being and produces population estimates and projections.
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