The State of American Household Finances

The Washington Post gives us a nice reminder today:

Meet the typical American family.

It has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can’t manage to pay off a $2,200 credit card balance.

That is the portrait of the median American household as painted by the Federal Reserve Board’s Survey of Consumer Finances.

Sure, overall wealth in the US seems to have risen a lot in recent years. But as PGL sagely reminds us from time to time, in real per capita terms much or all of that increase in illusory. Very commonly, household debts have risen as fast or faster than their assets.

By consuming instead of saving, the typical household has arrived at the situation described above: a dearth of readily accessible savings; the vast proportion of their wealth allocated to their house; and a huge resulting vulnerability to changes in the economy, interest rates, and personal fortunes. In that sense (and not coincidentally), the situation of the typical household could be taken as a pretty good metaphor for the US as a whole.