Wealth and Asset Ownership

1. What do we mean by median net worth?
2. What do we mean by average (or mean) net worth?
3. Comparison of average values and median values of net worth?
4. What do we mean by net worth?

The median net worth is the amount that divides households into two equal groups, one having net worth less than that amount and the other having net worth above that amount.

The average (or mean) net worth is the average obtained by dividing the total net worth of a group by the number of households in that group.

Average values and median values are measures of central tendency of distributions. For symmetric distributions, the average and the median values are the same. For skewed distributions, however, the average value and the median value differ. The distribution of net worth is skewed with a concentration of households with low values and very few households with high values. In this case, the median is less than the average net worth; the large proportion of values at the low end brings the median down, while less frequent but large values increase the average. Since averages are more sensitive to extremely high values and the data are sparse at the upper end of the distribution, medians are used in the reporting of net worth statistics.

Assets: Interest-earning assets held at financial institutions (savings accounts, money market deposit accounts, certificates of deposit, interest-earning checking accounts); other interest-earning assets (U.S. government securities, municipal or corporate bonds); stocks and mutual fund shares; rental property; mortgages held for sale of real estate; amount due from sale of business or property; non-interest earning checking accounts; U.S. savings Bonds; home ownership; vacation homes and other real estate; IRA and KEOGH accounts; 401K and Thrift Savings Plans; vehicles; and other financial assets.

Liabilities: Secured liabilities (margin and broker accounts; mortgages on own home; mortgages on rental property; mortgages on other homes or real estate; debt on business or profession; and vehicle loans) and unsecured liabilities (credit card and store bills; doctor, dentist, hospital, and nursing home bills; loans from individuals; loans from financial institutions; educational loans; and other unsecured liabilities).