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What Is the Average American Net Worth?

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What Is the Average American Net Worth?

Net worth is often used as a measurement of individual, or household, wealth. This value can give you a holistic perspective of your financial situation. In fact, the average American net worth is $748,800, according to the latest triennial Survey of Consumer Finances of the Federal Reserve. But how is this figure calculated? And how do you calculate your own net worth? Below, we take a closer look at the factors that distinguish your net worth from your fellow Americans.

Consider working with a financial advisor as you work to increase your net worth.

Net Worth Defined

Net worth is often used to contemplate the earnings of celebrities and high-profile individuals. But this measurement can be useful for anyone looking to manage their finances. If you know how much you’re spending in comparison to how much you’re earning, you’ll be able to be more strategic with your money. But before we determine the average American net worth, we should first explore its definition and how it works.

Net worth is the measurement of your net assets, which is basically the total of what you own minus any remaining liabilities or debt. An asset represents anything with value that either acts as money, can be transformed into money or can generate revenue. Your assets could include your money in a retirement savings plan, the funds in a checking or savings account, physical cash or property. Personal property, investments, money market accounts and certificates of deposit (CDs) also count as assets. Once you’ve added up the value of all your assets, you’ll be ready to calculate the sum of your liabilities.

Your liabilities represent what you owe. For instance, when determining your net worth you’d have to take into account things like student loans, personal loans or mortgage payments. Expenses like property taxes also count as liabilities. You’d then subtract the total of your liabilities from your total assets to calculate your net worth.

Household Net Worth

What Is the Average American Net Worth?

The Federal Reserve is not the only U.S. entity that gauges Americans’ wealth. The Census Bureau tracks bases the final value on households, not individuals. It measures household net worth across a number of demographics, including education level and age. In addition, the final average household net worth value represents the median value of all U.S. households. Therefore, the results represent a midpoint, and not an average, of all the data studied. The median is a more accurate representation of American net worth, because there are outliers that would skew the mean value. The outliers are individuals or households with an extremely high net worth. This might make the American mean net worth appear higher than it actually is.

The data presented some notable trends within net worth. Older Americans typically possessed a higher net worth than younger Americans, according to the Wealth of Households: 2020 study, published in August 2022 by the U.S. Census Bureau.

The median household wealth in 2020 was $140,800. The 10th percentile of household wealth was – $1,450, meaning one in 10 households had wealth of – $1,450 or less, the bureau study found. The 90th percentile of household wealth was $1,410,000, meaning one in 10 households had wealth exceeding $1.41 million.

Bottom Line

What Is the Average American Net Worth?

Whether you’re earning millions or just starting out with your first salary, determining your net worth is nonetheless important. If you’ve got liabilities such as loans or car payments, you’ll need to compare that to the amount of money you’re earning. You’ll have a negative net worth if you’re spending more than you’re earning, but you’ll have a positive net worth if you’re earning more than you’re spending. After calculating this value, you’ll better understand how to manage your wealth.

The Federal Reserve will publish its 2022 study in late 2023.

 Tips for Saving

  • One of the most effective ways to maximize your finances is by creating a budget. With a budget, you can compare your expenses with your income. This can help you determine whether you’re earning more than you’re spending, or vice versa. Whatever the case, you’ll then have a better idea of which steps you need to take to reach your savings goals.
  • Though budgeting is a strategic method for managing your finances, hiring a financial advisor can take things a step further. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/Milkos, ©iStock.com/Nattakorn Maneerat, ©iStock.com/Mintr

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