The Real State of Family Wealth: Quarterly Trends in Average Wealth and Demographic Wealth Inequality

By Ana Hernández Kent, Lowell R. Ricketts, William R. Emmons and Ray Boshara

The Center for Household Financial Stability presents average real (i.e., inflation-adjusted) wealth for various demographic groups using the Federal Reserve Board’s Distributional Financial Accounts (DFAs).

Our team documents quarterly trends in average U.S. family wealth and wealth inequality from 1989 onward. The Real State of Family Wealth regularly supplements our more in-depth, triennial (once every three years) Demographics of Wealth series, which generally uses median wealth instead of average wealth—producing different estimates of racial, generational and educational wealth gaps. (See the note on data sources below.)

Key Takeaways from Second Quarter 2020:

• On average, Black and Hispanic families owned about 23 cents and 20 cents, respectively, per $1 of white family wealth. These substantial gaps remain largely unchanged despite fluctuations from 1989 to 2020.
• Average millennial family wealth gained relative ground in recent years, narrowing the gap in average family wealth with Gen Xers at similar ages. At the same time, average wealth of older generations (Gen X and boomers) has grown steadily.
• The average family headed by a four-year college graduate has become much wealthier over the past several decades than the average family headed by someone with less education. In particular, those with less than a high school degree struggled to accumulate wealth, on average.
• The COVID-19 pandemic continues; thus, the second quarter of 2020 only gives an early glimpse at how wealth may be affected. Average wealth fell for most groups in the first quarter of 2020, but many of those losses reversed in the second quarter, which reflects the volatility in the value of financial assets seen early in the pandemic. Capturing timely changes in family wealth such as these is a strength of the DFAs.

The DFAs provided by the Board give quarterly estimates of nominal, aggregate U.S. household wealth. We make two important adjustments:

• We adjust the DFA estimates for inflation using the consumer price index, yielding household wealth values in real terms. This adjusts for changes over time in the purchasing power of a dollar.
• We also adjust for household population. This allows us to account for changing group sizes and to express wealth in terms of the average family’s household finances.

The result is average real household wealth values, available on a quarterly basis.

Visualizing Wealth

Racial and Ethnic Household Wealth Trends and Wealth Inequality

Generational and Age Household Wealth Trends and Wealth Inequality

Educational Household Wealth Trends and Wealth Inequality

A Note on Data Sources

The Federal Reserve Board creates the DFAs by combining data from the triennial Survey of Consumer Finances (SCF) and the quarterly Financial Accounts of the United States. See a paper by the Board of Governors of the Federal Reserve System for a discussion of how the estimates are constructed. Many of our reports, like the Demographics of Wealth series, use the SCF instead of the DFAs. The SCF is an extensive survey that allows us to examine median household wealth (wealth at the middle or 50th percentile), which we believe is more representative of a demographic group’s typical economic experience than is average wealth. However, the SCF is released only every three years, with the most recent survey featuring 2019 data.

While we prefer the depth of information provided by the SCF data, the DFAs allow us to study wealth trends in a more timely fashion, though with less flexibility than the SCF and an inability to examine median household wealth. Because specific DFA estimates change from quarter to quarter as data are updated, we advise placing more weight on trends than specific values. Overall, as average wealth trends roughly track median wealth trends, we find large wealth gaps and alarmingly low levels of wealth among vulnerable groups using both the SCF and DFAs.