The Federal Reserve released its latest data on the country’s finances on September 20. The household data show continued increases in wealth, but that is not the whole story. Millions of households are left out of the stock and housing booms. Moreover, costly consumer debt such as car loans and student debt are also on the rise, especially burdening those who are less likely to benefit from the run up in house and stock prices in the first place. Asset and debt inequality then reinforce each other, leading to the widespread massive wealth inequality by age, race, and education.
Households build wealth in their houses, retirement plans, and savings accounts. They typically will use their wealth to prepare for the future, primarily retirement, but also for emergencies, to start a business and pay for their kids’ education. In many cases, wealth will have to replace much of people’s incomes in retirement and an emergency, for instance. Economists thus consider the ratio of wealth to after-tax income as a key indicator of how well families are preparing for their future.The above excerpt was originally published in Forbes .