A Financial Snapshot of the Average American

Averages are a funny thing. I remember a teacher’s example: A guy had his head in the oven and his feet in the refrigerator. When asked how he felt, he said, “On average, pretty good.”

Averages can be an odd measure of things. Remember that 2.5 kids statistic?

On the other hand, averages help us see the big picture and understand our world in a specific context – average weight, average exam grade, average temperature, etc.

Let’s take a look at the average American from a financial point of view. (Sources range from years 2010-2012.)

1. Average American House

Owning your home is a unique part of our culture – one of the big American dreams. Homeownership is a forced savings method because as you pay down a mortgage, you build up equity and wealth.

Americans at Home

2. Average American Income

The money we use to give, save, and spend originates from our income. Individual and household incomes can vary greatly according to where you live. In NE Kansas, where I grew up, the medium income of the county is $31,971 while the median income of the community where we recently lived in the Bay Area of California is $118,713.

According to a December 2012 survey, 4 in 10 Americans are living paycheck-to-paycheck while 8% do not have enough to cover basic essentials.

3. Average American Giving

Giving of our time, talent, and treasure is a big part of our household financial picture. Individual giving (that includes family trusts) makes up nearly 9 out of 10 dollars donated. Many charities could not operate without the manpower provided by volunteers.

Giving of Treasure

Giving of Time

4. Average American Savings

Personal savings rate of American households is around 3.7%. Many families have little or no emergency savings to help weather a significant medical expense or loss of a job. Building up an emergency fund needs to be a high priority for any family that wants to build a good financial foundation.

Emergency Funds

College Savings

A recent study by American Saves determined that many families would like to save for their children’s college expenses, but a majority do not follow through. Families in the survey expected only 32% of college expenses to be covered by savings or parents’ income, 32% by grants and scholarships, 16% by student loans, 7% by parents’ borrowing, and the remainder of 15% from student savings, relatives, and friends.

Retirement Savings

Many reports show a big divide between how Americans expect to live during their retirement years and how they are saving toward that goal. The traditional pension plan is disappearing and Americans are going to need to save toward retirement through a workplace 401(k)-type plan or an IRA. One half of workers state they will work past the traditional retirement age simply to have access to a health care plan.

5. Average American Spending

A majority of our household income is spent on the basics of life. Let’s look at how a household with an average of $63,685 of income spends their money according to the Bureau of Labor Statistics.

Housing Expenses

6. Average American Debt

Over the past forty years, Americans’ dealings with debt has increased. Previous generations only used credit for large purchases such as a home or automobile. Today, it seems like anything can be purchased on credit with no money down.

Student Loan Debt

A couple of decades ago, student loan debt was labeled as “good debt” because it helped you increase your lifetime earning potential. With the skyrocketing costs of college and difficulty with post-graduation employment, student loan debt is consuming a larger portion of the household budget.

How does this help you?

Averages are a funny thing. They can be more specialized by age, education, or where you live. An average house in rural Kansas costs much less than the average house in San Francisco. The average high school graduate makes less than the average college graduate. Averages can make us feel more comfortable with our situation or they can spur us into action.

Does knowing the average of something change your perspective? What financial habits keep you above average? Leave a comment!

Article By Cherie

Cherie is an accountant with a passion to teach others about personal finance.


About williamk82

William Kohlmann is a student at Grand Canyon University’s Ken Blanchard College of Business where he is earning his Masters in Business Administration with an Emphasis in Finance while working full-time for a leading financial institution. He is an Eagle Scout from Troop 105 of Stroudsburg, Pennsylvania, aspires to be an entrepreneur, and currently lives in Phoenix, Arizona with his beautiful wife, Krystal.
This entry was posted in 401(k), Advice, Budgeting, Credit Score, Emergency Fund, Insurance Coverage, Investing, Personal Finance, Saving, Taxes and tagged , , , . Bookmark the permalink.

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