According to a new report from the Federal Reserve, American
families saw both their real income and net worth decline
significantly between 2007 and 2010. In addition, the report
indicates the percentage of families saving a portion of their
income has been steadily falling during the last decade.
Mean real income sees double-digit drop
The latest version of the
Federal Reserve Board's Survey of Consumer
, a report the Fed issues every three years, found a decline in
both the median and mean incomes for American families across
virtually every demographic. Overall, 2010 median incomes dropped
7.7 percent from 2007 levels when adjusted for inflation. Mean real
incomes saw an even bigger drop of 11.1 percent.
The decline in income was most significant for highly educated
families and those with a head of household younger than age 55. In
addition, pronounced declines were seen in families living in the
southern and western regions of the country. According to the
Federal Reserve, the groups seeing a notable increase in their
median income from 2007-2010 were retirees and other nonworking
Faltering investments, housing market cause net worth
Beyond simply losing real income, American families also
experienced a significant drop in net worth from 2007-2010. During
this time, mean net worth fell 14.7 percent, while median net worth
tumbled 38.8 percent overall. Median net worth levels in 2010 were
close to the low set in 1992.
The median net worth of families in the lowest quartile dropped
100 percent during the survey period. It was $1,300 in 2007 but
fell to zero in 2010. Other demographic groups seeing a significant
drop in median net worth include families headed by individuals age
35-44 and those living in the West. These groups saw their net
worth drop by 54.4 percent and 55.3 percent respectively.
As family debt remained relatively unchanged, the Fed report
cited the decreasing value of assets as the culprit for lost net
Bank rates for money market accounts
, CDs and other savings vehicles have dropped dramatically during
this period, and many other investments have also struggled as
well. Falling housing values have eaten away at the net worth of
many families too, particularly those for whom their property is
their biggest asset.
Only half of families saving money
Net worth wasn't the only statistic the Federal Reserve found to
be at its lowest level since 1992. The percentage of families who
reported saving money in 2010 was 52 percent, the lowest number
ever collected by the government survey. In 2007, 56.4 percent of
all families said they had saved money, and in 2001, that number
was 59.2 percent.
While savings rates were higher in previous years, the
motivation for saving has remained largely the same: Retirement and
liquidity have been the most cited reasons for saving during the
past 10 years.