Finances of the Average American

The Digerati Life has an infographic that details the finances of the Average American family. The highlights:

• The average American family has $3,800 in the bank.
• 50% of American households don’t have a retirement account.
• The 50% of households with retirement accounts only have $35,000 saved up (per family).
• The average family owns a house worth $160,000, $95,000 of which is their mortgage.
• Average income is $43,000 per year.
• Average credit card debt is $2,200.
• 40% of working Americans are not saving for retirement.
• $117,951 is the average American household’s debt.
• 25% of households have no savings whatsoever.
• 24% have postponed retirement.
• Only 18% are very confident about their retirement situation.
• $2 trillion is the combined amount of personal debt held by Americans.
• 7.7% don’t own a bank account!

Ugh! It's worse than even I thought!!!!

And...it's not too difficult to be "above average" financially. Americans sure are setting the bar low.

A few of the especially horrific findings:

• "50% of American households don’t have a retirement account -- the 50% of households with retirement accounts only have $35,000 saved up (per family)." And those of us who have way over $35k saved are pulling the average up big-time.
• "25% of households have no savings whatsoever." Yikes!!!!
• "Only 18% are very confident about their retirement situation." Based on the first bullet above, I think some of the 18% are overly optimistic.
• If the average American is $118k in debt and we know that $95k is the mortgage and $2k is credit cards, what's the other $21k? Car loans??? School debt???

Then again, a couple things are better than I would have guessed:

• "The average American family has $3,800 in the bank." I'm assuming the big savers are bringing up the average here, but perhaps not. Many big savers don't keep money in a bank (they keep it with brokers/in funds/etc., right?)
• "The average family owns a house worth $160,000, $95,000 of which is their mortgage." I would have guessed $160k and $120k, so better than I thought.

What's your take on this information? Better or worse than you expected?

Comments

[Bret]

FMF,

I always enjoy these types of articles and comparing myself to the "average" American. I think the followers of your blog probably have a very different average. Have you ever considered doing some sort of poll to determine how your average reader compares to the average American? I think it would be very interesting to see the differences (and similarities).

[texashaze]

What happens when all these people are retirement age? Does anyone think the US would ever tax savings/retirements to help cover the budget?

[MissGina]

Average income is $43,000 per year.... really??? Thats it?

[FMF]

Bret --

I have. I just need to get to it. :-)

[StLpastor]

MissGina-the average for a household is more like $50,000, so its a little higher. But yes, if you make $100,000 a year as a household, you have more than twice the income of the average American. Even counting cost of living differences, that is a big deal. There are a lot of people in this country who are struggling to get by.

Also, in our informal poll, I make more, have saved more, and have less debt than the average American before the age of 30. I'm not sure if I should be excited or just a little sad.

[Rae]

I always wonder what they consider a "family" when it comes to these things, and how that may skew statistics. Are my bf and I a "family," considering we maintain a household together? If so, does the fact that we’re in our mid-20s and only just started saving for retirement 2 years ago and thus have < $35k saved skew the results by offsetting a family that has been saving for longer and has more?

It’s still an interesting set of stats to consider though. Looks like we’re doing better than average, with the exception of that retirement number.

And I agree with Bret!

[W A G]

What will these people who live for today do when tomorrow arrives in what seems like a flash? Look for the producers to take care of them? I would ask them to use 9/11 as a refrence point to see how fast time flys. How sad if these are indeed the facts.

[jim]

"50% of American households don’t have a retirement account."
"40% of working Americans are not saving for retirement."

Those *seem* to contradict. If 40% of Americans are not saving then that means 60% are saving. But the first point says only 50% have retirement accounts.

My guess is that the 10% of people who are currently retired, the Y% who have fat pensions, the X% who are not in the labor force because they are stinking rich, the Z% who are independent college students, etc. are mixed in the sum of all households and throw things off.

[Sarah]

I hate dealing with averages - they don't give a good picture at all. If you want an idea of where most of America lies - look at the medians!!!

Other things to note: not everyone is middle class / upper class. Yes, if you can hardly scrape by with what you are making, you are much less likely to have a savings account, or a retirement account. A household making it off of minimum wage is probably very good at managing their money. That doesn't mean there is a lot extra to put away for retirement.

You have to start somewhere. Someone who just entered the work force is not going to have any retirement saved up yet, and will likely have no savings.

Does the "average American household" even own a home? Or is that only looking at home-owners?

Is the average debt looking at revolving credit at all? Because I charge at least 1k / month, but i pay it off every month. So I am always $1000 in credit card debt.

I don't know - these snap-shots always seem skewed to me, and they never seem to give a clear picture of what is actually going on.

[jim]

Rae, no, you and your BF are not a 'family'. Family means related. You are a 'household, nonfamily' by definition of the Census.

Family and Household are not the same thing technically. (your example is good case in point) But the article seems like it is using the terms interchangeably.

[Tyler]

$3,800 in the bank - credit card debt is $2,200 = $1,600

So if we paid off all of our debt (ex housing i assume) we would all have $1,600 in the bank. For everyone who has over $1,600 in the bank right now (after debts) you are above the average. If its a bell curve, think about how many people are below the average.

Assuming access to short term credit dried up (the bank lowers the credit limit to the balance), and income stopped, how long can the below average last? If I tried hard, that might get me 3 weeks- without writing any housing checks. Incredible. Scary.

[Easychange]

Averages are sums of the extremes. I want to see how the medians look and also the dispersions over certain key income ranges. It would be great to see a poll of fmf readers.

[jim]

BTW, at least some of the numbers they are using appear to be from the 2004 survey of consumer fiances which is 7 years old and 3 years older than the most recent SCF 2007.

"The average American family has $3,800 in the bank."

For that point they should have specified that $3800 is the median rather than just say average. The mean is actually more like $24k.

"25% of households have no savings whatsoever."

That one seems wrong to me. But I don't know what they are calling "savings". 93% of families hold some form of financial asset. 97% have transaction accounts. So the vast majority of families have money in the bank or investments of some form.

"7.7% don’t own a bank account!"

In 1989 the number was 14.5%

[MoneyCone]

The last point cleared a doubt I long had. Why do people pay outrageous check cashing fees instead of waiting a few days for a check to clear!

[Matt]

What can I say.

Anyone who reads this blog knows they are not average.

If they fall into average then they know there is hope that they will not be just average some day. That is if they learn the principles of not being avergage.

Just be paitent.

[Concojones]

Apparently the average American is someone running behind a carrot on a stick: spending all that comes in with no saving except for the mortgage payments ("forced saving"). The $3,800 in the bank is nothing but last month's paycheck.

I'd summarize saying that the average American has no plan or vision about what to do with his paycheck. Spend until it's gone.

I agree that medians would be more useful than averages, if these are true averages indeed (?).

[Concojones]

I forgot to take into account the retirement accounts. So there's a second big class of people who, in addition to the above, has a modest monthly outflow to their retirement accounts set up.

[Joe]

I'm having trouble getting past the "7.7% don't have a bank account" part. How do you function without a bank account of some type?

[BD]

I don't understand how "Average income is $43,000 per year", yet there are still stats like "40% of working Americans are not saving for retirement" and "The average American family has $3,800 in the bank".

How does that mesh? I've never once in my life made $43,000 in a year, and for most of my life, have lived well under poverty level. Yet, I've managed to save quite a lot more than $3,800 in the bank, and I do have some retirement savings (not much, but better than the 40% of Americans who have none).

Why is the average salary $43,000 a year, and the average saving so darn low? Are people basically house-poor? I've never owned a home. So I'm guessing everyone goes into debt and spends every available dime on a house, and has nothing leftover for saving?

@Joe: I'd be willing to wager to that most of the 7.7% without the bank account are illegal aliens. They often do not get bank accounts, and instead make every transaction in cash, and keep all their cash at home or on them at all times, in case of sudden deportation. And those that aren't illegal aliens might be homeless people who just deal in cash.

[Old Limey]

With these statistics for the average American family how can anyone be optimistic about the future of our country.

Thank goodness I was born into a typical working class family on the South coast of England in 1934 where all of my role models as I was growing set a wonderful example of living well within their means, not going into debt, because they were all renters, and credit cards didn't exist. Education was stressed very highly and my parents wanted me to have a better life and be more successful than them. Other things that didn't exist back then in the world I grew up in were divorces, babies born out of wedlock, single mothers trying to raise a family, and young couples living together before they were married. We also didn't have luxuries, never ate out in restaurants, had our shoes repaired, our socks darned and our shirts mended. I grew up during WWII in a home without a refrigerator, telephone, washer, dryer, central heating, TV, or Computer but had a very happy youth and great teachers. I ended up meeting a wonderful girl when I was 15, married her at 21 in a small stone church built in the 12th. century, emigrated to Canada when I was 22 with $400 between us, bought my first car at 23, a '55 Chevy, moved to the USA at 24, became a citizen at 29, retired at 58 after a wonderful career as an aerospace engineer in California, have three successful children, have been married for almost 55 years, and want for nothing with an investment portfolio above the mid 7 figure range.
Thanks Mum & Dad for all you did - life has been good!

[Mike Hunt]

What's the expression, "Figures lie and liars figure?"

* The average American family has $3,800 in the bank.

What about other sources of wealth (pension plan, 401k, CD's, mutual funds, stocks, etc)

* 50% of American households don’t have a retirement account.

Seems low to me. Definition of a retirement account is a 401k, 403b or IRA, though participation rates are higher.

* The 50% of households with retirement accounts only have $35,000 saved up (per family).

Is this average or median?

* The average family owns a house worth $160,000, $95,000 of which is their mortgage.

That means the average family has 40% equity in their home. In reality, many have a paid off home while others have very low equity. Figures lie.

* Average income is $43,000 per year.

That includes all the people who are unemployed or not in the work force.

* Average credit card debt is $2,200.

* 40% of working Americans are not saving for retirement.

They may be saving for a house or a college fund for the kids. I wonder how this question was asked.

* $117,951 is the average American household’s debt.

$95k of that is the mortgage (see above).

* 25% of households have no savings whatsoever.

I wonder how the assessment of savings is defined.

* 24% have postponed retirement.

If I wanted to retire at 30 but am still working, does this count as postponing retirement? Or does this mean that 24% of the people are working past the age of 65 because they don't have enough money to retire?

* Only 18% are very confident about their retirement situation.

With Bernanke at the helm, even as a multi-millionaire I would not feel confident about a long retirement!

* $2 trillion is the combined amount of personal debt held by Americans.

320 million Americans means an average of $6250 per American or about $20k per household- this must mean outside mortgage debt. Anyway, it's just a re-hash of a previously listed statistic (118k debt - 95k mortgage).

* 7.7% don’t own a bank account!

This does seem pretty strange but then again consider that 1% of our population is incarcerated and 0.3% are homeless. There must be a number of people using check cashing services.

-Mike

[Harm]

It's worse than we think....most of us will have to spend all our
Social Security in health care, Medicare, medicine, and Medigap insurance,
how do we pay for food and rent? I'm exaggerating a bit, but not as much
as I wish I were.

[Curt]

Seeing numbers like this always make me feel good...but I don't really compare myself to the 'average'.

Scary as 7.7% seems, I have actually seen estimates at much higher than that for people who do not use bank accounts. Here in my part of the country (S.E. Michigan), I have read estimates that it is closer to 30%.

[Money Reasons]

Interesting stats. I wonder when the information was gathered? I know on a msn site, it claimed the same $2,200 figure for credit card debt and it was published in 2007, so I'm sure the info that MSN used was older than 2007...

[Amer]

People with money read financial blogs. I think the majority of your readership is somewhat affluent. These statistics point to a widening disparity in American incomes. Middle class incomes do not afford a comfortable life.

[JimL]

Amer,

You are wrong. There are plenty of middle class income families that have a comfortable life. It comes down to spending less than you earn and then consistently saving money for retirement, large purchases etc. Unfortunately, many people do not live a comfortable life because they spend more than they earn and end up spending a large portion of their income on debt interest.

[Strick]

FMF - The Amer/JimL throwdown I sense beginning here would be an awesome post (and guaranteed to elicit tons of comments, if you're into that sort of thing).

[FMF]

Strick --

Can you email me? I have a question for you...

[John Z]

$160k for a house!? Where? I guess there aren't any average American's living in New Jersey... there are few places if any in the NJ/NY metro area that can be had for that price. Certainly not something detatched! This is, again, part of the problem of looking at "average" households by looking at averages that are spread across the entire country...although I must admit the savings figures, regardless of location are horrid.

[MattJ]

To add a little bit of perspective, it might help to know that the average American's age is around 36/37.

[FMF]

John Z --

$160k in my city gets you a 3,000 square foot house in a good neighborhood...

[Georgia]

I am surprised that it is even 50% with retirement savings, on average. I worked for the state and they matched a very small amount ($25) just to get you started saving in a 403b. It was nowhere near the majority of people who even considered it.

I had an office mate who worked there, as did her husband. When it came time to retire they were entitled to a lump sum portion of their retirement then. However, they would have had to take it and pay taxes on it. If they had had a 403b, they could have put it in that. I told her they had throwing away $50 a month for several years. They could have afforded the minimum of $50 out of their check (and actually it wouldn't have been a full $50 due to being taken out before taxes.)

I am feeling very lucky. I didn't start saving in my 403b until about 50. I have @ $75k in my account. But, between my SS & 2 small retirements from my husband and I, I am getting by on the annual living expenses. I even travel 2-3 times a year to family. I use the 403b to keep up my home. For a single person family, I feel I am doing quite well, especially considering that we were once knee deep in cc debt. We were paying our 2 cc's off monthly a couple of years before I retired. We got completely out of debt with the first withdrawal from my 403b.

[Jani]

"Power of American Economy is in American's spending power"...someone needs to rethink about it

[Nashville]

I think this readership is more affluent "on average" than normal and age has a lot to do with the averages. But you have to have a focused intent on how you want your financial life to turn out or it will never happen regardless of how much money you make.

I didn't marry until I was 33 years old (she was 35) and of course had no savings before then. But we got serious very quickly buying our first house in our first year of marriage, accelerating the mortgage pmts and selling after 8 years (in 1994) for $15,000 profit. We used $36,000 from savings to buy a 1-acre lot and used the house profit plus a little more as down pmt on building our current home 15 years ago again acceleralting the mortgage pmts and it is worth around $400,000 now.

We both had/have (she 'had', I still 'have') good, long-term, stable jobs which of course gave us a solid platform but it was our mind-set that got us to where we are now: No mortgage, zero debt, low 7-figure investments, her govt. pension and my staring retirement in the face at 58.

[Old Limey]

Checking accounts are still necessary but probably fewer and fewer checks are being processed these days.

I actually have two checking accounts but I only write 1 or 2 checks/month.
I find it more advantageous to charge every bill that I possibly can to one of several credit cards I use. One biller doesn't take CC so I use direct withdrawal from my account for that. When the CC bills arrive I immediately enter them into a free Bill Pay service at my credit union and pay them in full the day before they come due. Why not get cash back from your card companies, mine range between 1% and 3%.
Yesterday we received our COSTCO rebate of $485 because we charged an expensive vacation and business class airfares from a travel company for a 2% cashback as well as gas and restaurants at 3%, and groceries at 1%.

[brooklyn money]

For some perspective on the people who don't have bank accounts, the FDIC did a study last year on it. In addition to that 7.7% who are "unbanked" meaning they do not currently have a bank account, there are a lot of other people who are "underbanked" and have an account, but supplement with alternative financial services such as check cashers/payday lenders.

[jim]

I believe the 7.7% rate of people who don't have bank accounts.

One reason that people do not have bank accounts is that they bounced too many checks or otherwise messed up their checking account and now have a black mark in ChexSystems. That black mark lasts 5 years and the banks won't let them have accounts any more. Its equivalent to having trashed credit and trying to buy a house.

[Squirrelers]

None of this surprises me at this point - at least the knowledge that this is how the "average" person operates.

The lack of importance given to teaching personal finance basics - at home and in schools - means that we unfortunately have a lot of people that don't get it. I realize that many of us try hard and mean well, so there are obviously cases where it's not a matter of effort. Medical and other emergencies can crush smart, well-meaning people. But in many cases, it's that there are folks that just don't get it.

Think of thow those who are less responsible than average must live. Yikes!

Then again, we're running a big deficit as a country, so there's a problem on a a bigger scale that impacts all of us.

[Kathy F]

I believe the 7.7% that don't have bank accounts. Some of them must live in my neighborhood, where we have a check cashing business on nearly every block of our main business street. But I live in Arlington, VA where we have a lot of immigrants and think a lot of them don't use checking accounts for various reasons. Some of them don't trust banks or maybe don't have the documentation or credit references needed to open an account. If you don't write checks, you just pay cash or get money orders.

My mother lives in a $160K house, with four bedrooms, two baths and two car garage. In a bedroom suburban community of New Orleans.

[*Cat Rist]

This actually makes me feel pretty good. At 39 years old I don't have $3800 in the bank, but I also don't have a mortgage to pay on and I only owe $30,000 to a combination of car loan, attorney fees (divorce)and credi+t card debt. I have a retirement fund with matching with almost $30,000.

[Old Limey]

*Cat Rist
Do I have it right?
You are 39 years old, your net worth is close to zero, and yet you feel pretty good about it.

Why?

[Eric]

FMF,

You mentioned the fact that "2 trillion is the combined amount of personal debt held by Americans." I hear that fact often but that is only the credit card debt. Please add the mortgage debt amount. That is an especially important addition because that is reason for all this financial mess, mortgage debt got too high. If we add that, the federal reserve says we owe about $13.4 trillion in personal debt. I wonder how much interest is being paid to banks to help maintain our American $13.4 trillion lifestyle?

Keep up the good work,
Eric

[The Digerati Life]

It's dire. Reason is, we are a society that leans on debt for everything. I think Americans are known for their debt culture (the joke I hear is "debt and diet culture", and not in a good way). Lots of things here need to be fixed, but where to start? The idea of bailouts, outlandish CEO pay, seem to breed a certain culture of entitlement. These habits die hard.

[Lindsey]

About not having a checking account:
There are 2 main reasons
1) They have trashed their credit/banking relationship that was mentioned earlier.
2) They live in an area with no access to a bank. I don't live in much of a city, BUT even here there are areas with no bank or grocery store within a convenient distance (walking or bus). Those residents are served by check cashers, gas stations, or high-priced 'convenience stores'.

Other reasons: illegal residents, they come from a culture that does not trust the 'establishment', living off-the-grid