The pandemic was a catalyst for all types of change, and that includes how comfortable many am i wealthy Americans are with their nest eggs.
Americans say they need an average net worth of $774,000 to be “financially comfortable,”
and an average net worth of $2.2 million to be “wealthy,” according to the Charles
Schwab Modern Wealth Survey 2022.
The online survey, which was conducted in February and comprises answers
from 1,000 Americans between the ages of 21 and 75, shows not only that people think
they need more to be considered wealthy than they did in 2021 ($1.9 million),
but that they need more to feel like they’re on solid financial footing, too.
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That’s perhaps the most interesting takeaway from the data: The average amount needed
to attain financial comfort is down significantly from five years ago. In 2018,
the average amount needed to attain monetary contentment was $1.4 million—but by 2021,
it was only $624,000 and was bumped up to $774,000 this year. That may be due to the fact
that people simply learned to adjust their lifestyles and their financial outlooks after living
through the pandemic, experts say.
“Over the past few years, there’s been a lot of fear. A lot of people have thrived,
and a lot of people have had to simply figure out how to survive,” says Jedidiah Collins,
a certified financial planner and financial educator who runs the financial literacy platform
Money Vehicle. “On the whole, everybody’s finances were altered—nobody has the
same outlook they did in March 2020. I would imagine a lot of people are becoming
more financially conservative based on the fact that they went through an unprecedented
and unpredicted event.”
Aside from learning to live on tighter financial constraints, some Americans—those with money
in the stock market and home equity, in particular—may be feeling more confident
as their relative wealth has grown significantly, even if their earnings haven’t (until recently).
The S&P 500, for example, despite its recent downturn, was up more than 50% between
the end of May 2018 and the end of April 2022. Similarly, the median home price in
the U.S. was $315,600 during the second quarter of 2018—that figure was $428,700
as of the first quarter of 2022, according to Federal Reserve data.
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Even so, it’s worth noting that price increases over the past year have eroded purchasing
power for some households in a big way. So, interestingly, as money’s value has declined,
many Americans feel that they need less of it to be financially comfortable.
Given that the survey was conducted in February, those numbers may differ now
that we’ve seen several months of decades-high CPI numbers.
That $1.4 million Americans needed to feel stable in 2018 would be worth roughly
$1.61 million today. But as interest rates rise and the stock market sputters,
Collins says the current economic environment may serve as a wake-up call for households
who have grown comfortable with having less.
Overall, though, it’s a hard circle to square, and we may just need to chalk it up to the fact
that the pandemic—and all of the economic snarls and devastation it brought with it—has
changed the way many households feel about money.
“We’re getting a reality check,” Collins says. “The market doesn’t always go up,” he adds,
and says that after a year of tightening economic conditions and a possible recession,
Americans may feel that they need to rethink how much money will allow them to sleep
at night without worrying about paying their bills.
