Your Money: How Financial Assets Are Driving the Rise in Household Wealth
Excerpt:
Household wealth is surging, powered by booming financial assets like stocks and retirement funds rather than traditional property holdings. Discover the trends reshaping net worth, why equities matter more for the wealthy, and strategies from Cheshire Business Accountants to optimise your portfolio for long-term growth.
Introduction: A Wealth Boom Led by Financial Powerhouses
Household wealth has seen remarkable growth in recent years, with financial assets—such as equities, retirement accounts, and liquid investments—emerging as the primary drivers. Between 2019 and 2022, real median net worth in the US surged by 37%, and mean net worth rose by 23%, outpacing inflation thanks to rising house and corporate equity prices.[5] This shift marks a departure from property-dominated wealth, as financial assets gain prominence, especially among higher-wealth groups.[2][4]
The Shift from Bricks to Stocks: Breaking Down Asset Composition
Traditionally, homes and vehicles formed the bulk of household assets, particularly for lower-wealth families. However, data reveals a clear pattern: as wealth increases, financial assets dominate.
- Lower-wealth households (bottom 50%) hold about 70% of assets in nonfinancial forms like housing and cars, with real estate comprising over 50% of total assets. Equities make up just 15-20% of their financial wealth.[2]
- Wealthier households flip this: the top 0.1% allocate only 9% to real estate, with 70% of financial assets in equities.[2] For the 90th-99th percentiles, equity shares jumped from 37% to 47.2% recently.[2]
| Wealth Group | Share of Nonfinancial Assets | Real Estate in Total Assets | Equities in Financial Assets |
|---|---|---|---|
| Bottom 50% | ~70% | >50% | 15-20% |
| 50th-90th | Decreasing | Declining | 19.3-23.8% |
| Top 1% | Minimal | 13.1% | High (up to 70% for top 0.1%)[2] |
This table highlights the inverse relationship: nonfinancial assets shrink as wealth rises, while equities propel financial portfolios.[2]
In 2021, the median US household net worth reached $166,900, with home equity at $174,000 for owners (45% of net worth) and retirement accounts at $76,000 (27% for owners).[3] Yet, asset values rose or held steady from 2019-2021, offsetting debt increases and boosting net worth.[3]
Inheritance and Intergenerational Boosts to Financial Wealth
Inheritances play a key role, positively correlating with net household wealth via financial assets like publicly traded shares and self-employment businesses, while reducing mortgage debt.[1] Households use bequests to pay down home loans, freeing up cash flow without spiking consumption or leisure spending—aligning with rational life-cycle models.[1]
Real estate remains vital (main residence and other holdings), but inheritances amplify liquid assets over property.[1]
Broader Trends: Concentration, Confidence, and Total Wealth
- Wealth concentration: Top 20% households control most net worth, holding stocks and homes while being less rate-sensitive. Liquid assets grew 13% for them (post-inflation) since 2019, vs 5% for bottom 60%.[4]
- Total scale: US household financial wealth exceeded $90 trillion in 2024, with retirement assets at $31.9 trillion (IRAs: $16.7T; defined contribution: $11.7T).[7] Family wealth quadrupled from $52T to $199T (1989-2022, inflation-adjusted).[8]
- Wealth effect: Rising net worth (now >6x personal income) boosts consumer confidence, driving spending.[4]
Racial gaps persist: Black and Hispanic households lag in home, retirement, and stock ownership; 10% own only vehicles or checking accounts.[3] Factors like homeownership years, income, and inheritance widen disparities.[6]
What This Means for Your Money: Actionable Insights
Financial assets' rise offers opportunities, but requires strategy:
- Diversify into equities: Mimic wealthier portfolios by increasing stock exposure via low-cost index funds or pensions.
- Leverage retirement vehicles: These are now pivotal—maximise contributions for tax advantages and growth.
- Manage debt wisely: Like inheritance recipients, prioritise mortgage reductions to enhance net worth.[1]
- Build liquid buffers: Bank deposits and money market funds have grown, providing security amid volatility.[4]
- Plan for inheritance: Discuss family transfers to optimise asset allocation.
Net worth calculation is simple: subtract liabilities from assets. Track yours regularly to capitalise on these trends.[9]
Partner with Experts for Optimised Wealth Growth
At Cheshire Business Accountants, we specialise in tailoring financial strategies to harness rising asset values. Whether reviewing your portfolio, inheritance planning, or debt optimisation, our team ensures your household wealth thrives. Contact us today for a personalised consultation.
Tags: household wealth, financial assets, net worth growth, equities investing, inheritance planning, wealth inequality, retirement accounts, Cheshire Business Accountants
Category: Personal Finance
Sources
- https://pmc.ncbi.nlm.nih.gov/articles/PMC9392504/
- https://fredblog.stlouisfed.org/2024/04/comparing-household-assets-across-the-wealth-distribution/
- https://www.pewresearch.org/2023/12/04/the-assets-households-own-and-the-debts-they-carry/
- https://www.tiaa.org/public/pdf/t/the-household-wealth-effect-from-wall-street-to-main-street.pdf
- https://www.federalreserve.gov/publications/files/scf23.pdf
- https://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States
- https://www.cerulli.com/press-releases/u.s.-household-total-financial-wealth-exceeds-90-trillion
- https://www.cbo.gov/publication/60807
- https://www.fidelity.com/learning-center/smart-money/average-net-worth-by-age
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