Meet the Author

Daniel Carroll |

Research Economist

Daniel Carroll

Daniel Carroll is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. His primary research interests are macroeconomics, public finance, and political economy. Currently, he is studying the implications of progressive income taxation for the distributions of wealth and income.

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Meet the Author

Kathryn Holston |

Research Intern

Kathryn Holston is an intern in the Research Department of the Federal Reserve Bank of Cleveland. She joined the Bank in June 2013 and her primary interests include macroeconomics, consumer finance, and international economics.


Economic Trends

Rising Asset Ownership Among the Income-Poor

Daniel Carroll and Kathryn Holston

According to the Survey of Consumer Finances, the fraction of low-income households (defined here as the bottom 20 percent by income) with positive assets has risen considerably over the past two decades from 78.5 percent in 1989 to 90 percent in 2010. In contrast, there has been almost no change in the share of households with positive assets within the top four income quintiles over the past 20 years—within these quintiles, nearly all households own assets.

The survey divides asset holdings between financial assets and nonfinancial assets (like houses and cars). Relative to 1989, a somewhat larger fraction of low-income households report owning nonfinancial assets, but there has been a more pronounced increase in the fraction owning financial assets. The share of households that owns some financial assets surpassed the share that owns some nonfinancial assets in every year except 1989. Additionally, growth in the share of households owning financial assets has outpaced growth in the share owning nonfinancial assets over the past two decades.

A closer look at what the wealth of the lowest income quintile consists of reveals that ownership of liquid accounts like checking accounts (counted under financial assets) has been growing steadily for the past two decades. In 2010, about three-fourths of low-income households reported owning liquid accounts, compared to just over half of these households in 1989. In contrast, there has been almost no change in home ownership over the past 20 years.


One possible explanation for this trend of increasing financial asset ownership is that the age composition of the bottom quintile may have shifted toward older households, who tend to have more financial assets than their younger counterparts. However, we do not find any dramatic change in the age distribution of heads of households in this income quintile since 1989. Additionally, the share of low-income households with positive assets has remained relatively constant for households that are headed by someone who is 65 or older. In contrast, the share that owns assets has increased sizably for households in which the head is younger than 64. This is true for the subset of households headed by those under 29 and the subset headed by those 30–64. The percentage of households owning assets in both of the two lower age brackets increased from less than 75 percent in 1989 to almost 90 percent in 2010, mirroring the growth in overall asset ownership.

An alternate explanation is that a shift to electronic transfer payments for government aid benefits may have resulted in increased ownership of financial assets among those that receive transfer income. Over the time period in question, many states began to transfer government aid benefits solely through direct deposit or other electronic means. Households receiving such aid make up a sizeable minority of low-income households. On average over the last 20 years, almost 40 percent of these households have received some type of aid transfers (such as food stamps, Temporary Assistance for Needy Families (TANF), etc). Looking at asset ownership, we see that there has been a more substantial increase in financial asset ownership among the low-income households that have received transfer income than among those that have not.

While not conclusive, our findings support the hypothesis that changes in the way transfer aid is distributed is a primary cause for the rise in asset ownership among the income-poor. In light of these findings, one may wonder if the rise in asset ownership has been accompanied by a sizeable rise in the level of wealth among the poor. Specifically, does opening a bank account encourage households to save more? In real dollars the median value of financial asset holdings among the income-poor has increased by almost 50 percent over the period studied. The levels (in 2005 dollars) are still very low, however, with medians of $307 and $455 in 1989 and 2010, respectively.