Financial Update (Second Quarter 2003)


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Survey Shows Increased Income and Net Worth for U.S. Families

U.S. family income and net worth grew between 1998 and 2001, according to data from the Federal Reserve Board’s Survey of Consumer Finances (SCF). The data also show an increase in the number of families that own corporate equities and in the level of home ownership. At the same time, though, the percentage of families with any sort of debt rose.

The SCF, conducted every three years since 1983, collects information on U.S. families’ financial information, including total cash income before taxes and use of financial services. The collected data provide a picture of what Americans own, how and how much they borrow, and how they bank. The 2001 survey draws on data from more than 4,000 respondents.

A study published in the Board’s Federal Reserve Bulletin reviews data from the most recent two surveys, in 1998 and 2001, as well as previous surveys.

Income and net worth
The study reports that inflation-adjusted family incomes rose faster from 1998 to 2001 than they did from 1995 to 1998, with faster growth in both the top and bottom income groups than in the middle.

From 1998 to 2001, net worth also rose considerably; median wealth rose 10.4 percent, and the mean rose 28.7 percent. From 1992 to 2001, a period covered by four SCFs, median wealth rose 40.5 percent, and the mean rose 71.6 percent. Although net worth increased for all income groups, the largest gains occurred in families in the top 10 percent of the income distribution.

Surprisingly, even as income and net worth increased significantly, the share of financial assets rose a mere 1.3 percent from 1998 to 2001. From 1992 to 2001, the percentage of value that families held in investment options declined: Certificates of deposit dropped from 8 percent to 3.1 percent, bonds declined from 8.4 percent to 4.6 percent and savings bonds decreased from 1.1 percent to 0.7 percent.

The share of families with a transaction account — checking, savings, and money market deposit accounts, money market mutual funds and call accounts at brokerages — rose only slightly during the 1998–2001 period, but the median holdings in these accounts rose 21.2 percent.

While the level of ownership of nonfinancial assets — such as homes, vehicles or business equity — grew for most families during the 1998–2001 period, the value of these assets as a proportion of the value of the total assets of all families fell from 59.3 percent to 58 percent.

As assets grew, so did liabilities. But assets grew faster than liabilities, so the ratio of family debts to assets dropped from 14.3 percent to 12.1 percent from 1998 to 2001. Indeed, during this period the number of families with payments that exceeded 40 percent of their incomes dropped 1.8 percentage points to 11.0 percent.

Survey results influence policy
The triennial SCFs provide policymakers with important information about the financial condition of American families. The insights from previous surveys have influenced policy discussions about a broad range of issues, including pension and social security reform, tax policy and deposit insurance reform.

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