The financial asset structure of U.S. households plays an important role in explaining the high level of wealth in society. Today, we will take a detailed look at this structure and its changes over several decades.
Current Financial Asset Landscape
Right now, the total financial assets of American households amount to a staggering $115.4 trillion. This accounts for 335.7 million people, averaging out to about $344,000 per capita. If we consider only potentially working-age citizens aged 16 and older (267.4 million people), the average amount of financial assets is already $431,000 per person.
However, this group also includes people who, for various reasons, cannot or do not want to work, including those unable to work due to age, residents of psychiatric hospitals, nursing homes, prisons, housewives, free artists, and others. It is estimated that there are about 99.5 million such people.
Workforce and Financial Asset Distribution
The labor force in the U.S. is 168 million, including both employed and officially unemployed. Those officially employed, including those in seasonal, part-time, or agricultural work, total 161.6 million.
Consequently, we can assume that about 215 to 220 million people in the U.S., which is about 80% of people over the age of 16, may hold financial assets of $3,000 or more. The rest are dependent on government benefits and have less than $3,000 in accumulated savings.
Thus, an average of financial assets over $1 million per American family should not be surprising. This follows from simple math and balance sheet ratios.
However, it is worth noting that financial assets are extremely unevenly distributed across the country. Preliminary estimates show that about a third of the population has less than $15,000 in financial assets, and at least 20% live from paycheck to paycheck, relying on food stamps and welfare benefits.
Long-Term Trends in Financial Asset Distribution
Concerning long-term trends in the distribution of financial assets, several key points can be emphasized. Over the past 40 years, pension reserves, both private and public, have played a major role in the financial assets of U.S. households, accounting for between 28% and 35% of total assets. Pension funds invest in stocks, bonds, and mutual funds, depending on the type of fund, but average between 30% (public) and 50% (private) of the equity investment concentration.
From 1985 to 2000, there was a decline in the share of cash and deposits in favor of investments in investment funds, including mutual funds, money funds, ETFs, and hedge funds. Since 2000, however, the share of cash assets and investment funds has remained about the same.
An interesting trend is the sharp decline in the share of non-public businesses from 1982 to 2000, which is due to the incorporation of private companies into joint-stock companies and their subsequent development. In addition, there is a process of business consolidation and displacement of small and medium-sized companies, except the service sector. It is now difficult for startups to find a place in the market, except for the IT segment.
As far as equity investments are concerned, here we see a repetition of the dynamics of equity market capitalization. Insurance reserves, in turn, are losing popularity; their share has tripled in the last 70 years and halved in the last 40 years.
Bonds were used as an alternative investment diversification tool from 1981 to 1995, but after that period, falling rates and difficulty in understanding the bond market made them less attractive. From 2009 to 2012, bonds experienced a rise in popularity after the 2008 - 2009 crisis and are now becoming interesting again due to high rates.
Conclusion
In summary, the financial asset structure of U.S. households can be characterized as diverse and dynamic. It reflects a variety of factors such as investment strategies, changes in economic policies and financial markets, and socioeconomic trends in society.