According to a new report from the Federal Reserve, American families saw both their real income and net worth decline significantly between 2007 and 2010. In addition, the report indicates the percentage of families saving a portion of their income has been steadily falling during the last decade.
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Mean real income sees double-digit drop
The latest version of the Federal Reserve Board's Survey of Consumer Finances, a report the Fed issues every three years, found a decline in both the median and mean incomes for American families across virtually every demographic. Overall, 2010 median incomes dropped 7.7 percent from 2007 levels when adjusted for inflation. Mean real incomes saw an even bigger drop of 11.1 percent.
The decline in income was most significant for highly educated families and those with a head of household younger than age 55. In addition, pronounced declines were seen in families living in the southern and western regions of the country. According to the Federal Reserve, the groups seeing a notable increase in their median income from 2007-2010 were retirees and other nonworking families.
Faltering investments, housing market cause net worth decline
Beyond simply losing real income, American families also experienced a significant drop in net worth from 2007-2010. During this time, mean net worth fell 14.7 percent, while median net worth tumbled 38.8 percent overall. Median net worth levels in 2010 were close to the low set in 1992.
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The median net worth of families in the lowest quartile dropped 100 percent during the survey period. It was $1,300 in 2007 but fell to zero in 2010. Other demographic groups seeing a significant drop in median net worth include families headed by individuals age 35-44 and those living in the West. These groups saw their net worth drop by 54.4 percent and 55.3 percent respectively.
As family debt remained relatively unchanged, the Fed report cited the decreasing value of assets as the culprit for lost net worth. Bank rates for money market accounts, CDs and other savings vehicles have dropped dramatically during this period, and many other investments have also struggled as well. Falling housing values have eaten away at the net worth of many families too, particularly those for whom their property is their biggest asset.
Only half of families saving money
Net worth wasn't the only statistic the Federal Reserve found to be at its lowest level since 1992. The percentage of families who reported saving money in 2010 was 52 percent, the lowest number ever collected by the government survey. In 2007, 56.4 percent of all families said they had saved money, and in 2001, that number was 59.2 percent.
While savings rates were higher in previous years, the motivation for saving has remained largely the same: Retirement and liquidity have been the most cited reasons for saving during the past 10 years.
The original article can be found at Money-Rates.com:
Family income, net worth on the decline