Every three years, the Federal Reserve orchestrates a checkup of the financial health of Americans. It's called the Survey of Consumer Finances and is a treasure chest of insights into how people in the U.S. earn, spend and save. More importantly, it gives you a perspective on how well your household finances are doing compared to the rest. The last survey was conducted in 2022 and did not disappoint when it came to shocking data.
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How The Average American Became A Millionaire
The average net worth came up to slightly over $1 million, which technically means that an average American belongs to a millionaire household. The average annual household income came in at $141,390. But such a rosy picture does not represent reality, and median values give that away. They stood at $192,700 and $70,260 for net worth and income, respectively, meaning that high earners heavily skew the averages.
According to LendingClub and PYMNTS, living paycheck-to-paycheck is rampant across the country. Sixty percent of people report spending their wages by the next pay cycle. Four in 10 are considered to be high-income earners. In such a landscape, regularly setting money aside is difficult. However, the Fed's 2019 Survey gave away one income threshold, after which saving becomes easier.
Intuitively speaking, it makes sense that the saved amount goes up with income linearly, which is true, but only up to a point. That point was a household income of $90,000 per year. Families making $80,000 to $89,900 had $51,840 saved on average. However, families earning just $10,000 more had an average of $229,030. This earning level could be when most needs are taken care of and consumption gives way to saving, making it a significant financial milestone.
Trending: Can you guess how many Americans successfully retire with $1,000,000 saved? The percentage may shock you.
Other Influential Factors
Household income was far from the only demographic characteristic that has an effect on savings. Traits like college education, family type and homeownership play a big part in how much you can stash away. Single-parent households with little education who rent will, statistically speaking, have a tough time saving. Race also seems to be an important factor, as White households outsaved Black and Hispanic households by a considerable margin — $80,040 to $13,370 and $15,710, respectively.
Taking Advantage Of High Interest Rates
The type of savings account also matters in the total sum you'll be able to save. Regular savings accounts have served more as a way to park your liquid funds than as an investment. But high-yield savings accounts (HYSA) are different because of the Fed-imposed high interest rates. HYSAs can noticeably grow your assets as they currently yield up to 10 times as traditional savings accounts. Because up to $250,000 or more is usually protected by government bodies, HYSAs are also one of the most secure investment options out there.
The Fed is expected to maintain the high interest rates for some time, but at some point, they will go down. That's why taking advantage of the high rates before they get slashed overnight is a good idea.
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- If the United States had access to today’s high-yield savings accounts rates in 2015, it wouldn’t need to save another penny.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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