Decades of evidence suggest this premise is correct: Asset ownership generally improves the well-being of families and provides an irreplaceable rung on the ladder to a stable place in the middle class. Even so, the share of households owning a home or other assets has fallen over the last decade, particularly among vulnerable groups like African-Americans, Hispanics, and millennials. To revive upward mobility and safeguard the “American Dream” of a secure middle-class life, reversing this trend is essential.
Households accumulate assets to prepare for retirement, as well as for lumpy expenses like college tuition and medical bills. Accumulated savings are the most important funding source for startup businesses — and the decline in asset ownership arguably helps explain a puzzling downtrend in startup activity. Asset holdings also serve as a “buffer stock” enabling families to smooth spending over time in the face of ups and downs in their income.
Asset ownership is especially important to middle-class families in the United States compared to other economies, in view of America’s relatively modest government safety net. Social Security, for instance, replaces only about 40 percent of a median individual’s earnings during her retirement years, or 30 percent for someone earning about $100,000 – less than in most European countries.
Middle-class families also encounter much higher tuition bills and health expenses than peers elsewhere. Studies show that even a small savings stock makes a big difference to the well-being of lower-income families experiencing a financial setback.
The evidence also suggests that, for most families, home ownership brings considerable benefits.
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