The Balance Sheets of Low-Income Households: What We Know about Their Assets and Liabilities. Total Asset Holdings

11/01/2007

Total assets include all financial assets (such as bank accounts, stocks, bonds, and pensions) and nonfinancial tangible assets (such as homes and real estate, businesses, and vehicles). Asset values reflect the values reported at the time of the interview and so, in theory, include the net accumulation of all capital gains and losses.

A look at total asset holdings by income reveals large disparities (exhibit 2). Bottom income quintile families hold median total assets of $17,000, almost five times less than second quintile families ($78,300), nine times less than third quintile families ($154,400), 17 times less than fourth quintile families ($289,400), and 48 times less than fifth quintile families ($808,100).

Exhibit 2.
Median Total Asset Holdings by Income Quintile, 2004

Exhibit 2.  Median Total Asset Holdings by Income Quintile, 2004. See text for explanation.

Income Percentile

Source: The Urban Institute. Data from Bucks et al. (2006) using the 2004 Survey of Consumer Finances.
Note: Breakout of income quintiles: Q1: <$18,000; Q2: $18,000-$31,999; Q3: $32,000-$51,999; Q4: $52,000-$85,999; Q5: >85,999.

Classifying families by education status, one of the best proxies for long-term economic status, reveals that families who are headed by someone who did not complete high school have only $49,900 in median asset holdings, compared with families headed by a college graduate who have asset holdings of $357,000, or seven times as much (exhibit 3).

Exhibit 3.
Median Total Asset Holdings by Family Characteristic, 2004

(In thousands of 2004 dollars)

Exhibit 3.  Median Total Asset Holdings by Family Characteristic, 2004. See text for explanation.

Source: The Urban Institute. Data from Bucks et al. (2006) and Urban Institute tabulations using the 2004 Survey of Consumer Finances.

Classifying families by age reveals the important life-cycle patterns of asset accumulation. Those below age 35 have median asset holdings of just $39,200, compared with peak median asset holdings of $351,200 at ages 5564, or nine times as much (exhibit 3). Ideally, one would account for these age differences when looking at the role of income, housing status, family structure or any other classifier on assets. Without accounting for these age patterns, age may partially explain differences in asset holdings between those who are low-income and those who are higher-income (if younger families are more likely to be low-income), or those who own a house and those who rent (if older families are more likely to own), for example. This study accounts for age differences when examining net worth, where these calculations are available in the extant literature.

Classifying families by race or ethnicity begins to reveal the large asset divide discussed in detail in Oliver and Shapiro (1997). The median asset holdings of nonwhite Hispanic families were just $59,600 in 2004 while the median for white non-Hispanic families was more than three times as much at $224,500 (exhibit 3).

Family structure also has a strong correlation with total family asset holdings. The median asset holdings for single-headed families was just $83,400 while for married or cohabiting families the median was $265,800, again about three times as much (exhibit 3).[3] Finally, classifying families by housing status exposes the greatest divide in total asset ownership. Median assets were just $12,200 for renters compared with $289,900 for homeowners, or about twenty-four times as much (exhibit 3).

Portrait of a low-asset family. A typical low-asset family would be headed by a single nonwhite or Hispanic adult under 35 years of age without a high school diploma, and who does not own a home.

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