The Great Recession has had a significant impact on the average U.S. family’s ability to save money – or at least hold on to what they’ve saved. A new triennial study released Monday by the Federal Reserve revealed that, between the years 2007 and 2010, the recession wiped away nearly 40 percent of the average family net worth.
Great Recession Eliminates 18 Years of Savings
The Federal Reserve’s Survey of Consumer Finances — which offers details on savings, income, debt and other assets and investments owned by American families — showed just how detrimental an effect the Great Recession had on net worth.
It revealed the average family net worth dropped 38.8 percent over the three-year period with the median net worth falling to $77,300 in 2010 from $126,400 in 2007. These numbers indicate that the recession negatively impacted a jaw-dropping 18 years of savings and investment by families.
The survey found that income levels fared no better than savings. Over the course of those years, median pre-tax income fell 7.7 percent as earnings from capital gains all but disappeared. As a result, the number of Americans able to save money dropped by 4.4 percent to 52.0 percent in 2010 — the lowest level recorded since the early 1990s.
Average Family Net Worth Impacted by Home Values
One major contributor to the massive drop in savings and average family net worth was plummeting home prices during the downward economy. As a result of low home values, the median homeowner had a net worth of $174,500 in 2010, as opposed to $246,000 in 2007.
The report found that families living in the west and southern regions struggled the most. With the Great Recession hitting those housing markets the hardest, their average net worth dropped further than the rest of the country.
A bit of good news in the report was that a larger group of families were able to escape debt over the three-year period. The total share of families with debt decreased slightly to 74.9 percent, while the median credit card account balance dropped 16.1 percent.
Also, families in the top 10 percent of income actually saw their net worth increase over the period, showing that the Great Recession had the largest impact on middle and low income families.