Americans have a net worth problem, and it is not positive.

A recent article published online (April 17, 2023) had some very sobering data on the current state of what Americans have saved for retirement. I have reproduced the article first published online at Bloomberg wealth below and it makes one pause about the very fragile nature of the economic environment in the United States today.

It revealed that “more than half of Americans do not know how to calculate their net worth (51%) and that nearly one-third of Americans have a net worth of $0 or less (31%). In addition, 30% of Gen Z care more about celebrities’ net worth than their own.?

“When people hear the term “net worth”, names of distinguished CEOs and famed celebrities likely come to mind. That is because the term “net worth” is most often searched when investigating the wealth of a random celebrity or the richest person in the world. However, despite Americans’ fascination with other people’s net worth, it is not a figure the average American knows about themselves.?

According to a study conducted by Qualtrics on behalf of Credit Karma, 51% of Americans do not know how to calculate their net worth and it is worse for women than men. More than 60% of women say they do not know how to calculate their net worth (61%) compared to 41% of men. The same is true for respondents with subprime credit scores (600 and below), 62% of which said they do not know how to calculate their net worth compared to 42% of respondents with prime credit (661 or above).?

Meanwhile, 33% of Americans say they know one or more celebrities’ net worth. This was even more common among younger generations. According to the study, 64% of Gen Z know one or more celebrities’ net worth, along with 45% of millennials. That is compared to just 12% of Boomers+.?

Americans’ net worth does not look positive?

When it comes to Americans’ actual net worth, 31% say their net worth is $0 or in the negative, meaning their total amount of liabilities meets or exceeds their assets. This trend is exaggerated among younger generations, in particular Gen Z, 41% of which have a net worth of $0 or less, along with 38% of millennials. More concerning, however, a significant population of aging Americans, those who may soon be looking to retire, also report having a net worth of $0 or less (21% of respondents aged 59 and above).?

This could have something to do with the state of consumers’ retirement accounts. According to the study, nearly one-in-five respondents aged 59 and above (19%) do not have a retirement account, the highest percentage of any generation. Another 5% of respondents in this age bracket say they cannot afford to contribute to their retirement account at all. Of those within this group who are employed and are saving for retirement, 17% say they have decreased their contributions to their retirement accounts as a result of inflation.?

When it comes to retirement savings, 27% of respondents say they do not have any money saved for retirement right now, including 401(k) and Roth IRAs. That includes 25% of Gen X respondents and 27% of respondents aged 59 or above.

You have to know your net worth to grow your net worth?

Knowing one’s net worth is often the first step in increasing their net worth. Yet, 67% of Americans say they do not currently track their net worth. This was most common among older generations and women. Gen X and respondents aged 59 or above were the most likely to say they do not currently track their net worth, 73% and 68% respectively. Women were also far less likely to report staying on top of their net worth than men, 77% compared to 55%.?

Beyond not tracking their net worth, many Americans do not know what actions to take to grow their wealth. According to the study, nearly 20% of Americans do not know what actions to take to increase their net worth (18%) with Gen Z being the least confident generation to know what actions to take to grow their net worth (28%). Similarly, women were more likely to report uncertainty about what actions to take to increase their net worth, 22% compared to 14% of men.?

Does the term “net worth” apply to me??

According to the study, more than one-in-five Americans believe the term “net worth” only applies to wealthy people (22%). This number jumps to 38% for Gen Z respondents and 33% for millennials. This false belief could lead consumers to care less about their net worth and potentially hold them back from building wealth. More than half of respondents said knowing their net worth was not important to them (56%).?

Instead, many consumers – especially younger generations – have taken more of an interest in celebrities’ net worth than their own. According to the survey 13% of Americans say they care more about a celebrities’ net worth than their own. This number jumps to 30% for Gen Z.?

“There’s a common misconception that the term “net worth” is only reserved for wealthy individuals and high earners, but that’s not the case. Net worth applies to anyone who is on the path of building wealth and that includes people who are just beginning to save or even still paying down debt,” said Courtney Alev, consumer financial advocate at Credit Karma. “Just like your credit score, net worth is an important number to track consistently as you begin to pay down debt, save money for retirement and achieve major financial milestones, like buying your first car or home. If you don’t know your current net worth, there are many online tools that can help you understand what actions you can take to grow and protect your money.”

Methodology:

This survey was conducted online within the United States by Qualtrics on behalf of Credit Karma between March 20, 2023 and April 3, 2023 among 1,006 adults ages 18 and older.”

Source: Bloomberg Wealth, April 2023.?