That Fed survey on drop in US wealth – and investment in education

By now, you have probably read the stories about the new survey of income and wealth by the Federal Reserve “Changes in U.S. Family Finances from 2007 to 2010” from the 2010 Survey of Consumer Finances. The headline is that family wealth has dropped dramatically to levels of decades ago, mostly due to the drop in housing prices. Obviously, the survey covers tangible and financial assets, such as houses and stocks/bonds. But there are some hints at intangible assets.
For example, here is what the survey says about what people are saving for, “Education-related motives also appear to be important, but less so than in 2007; in 2010, 8.2 percent of families reported it as their primary motive, down only slightly from 2007 but down 3.4 percentage points since 2004.” While saving for education has dropped in the last decade, education as a reason for incurring debt rose from 3.1% of all family debt to 5.2%. In other words, education is still seen as a valuable intangible asset but the means of financing it has shifted from saving to debt. That may be a function of people seeing a return on investment in education (i.e. thinking that they can pay off the debt with future earnings). Or it may be the result of a more damaging trend of ever-higher educational costs (beyond what families could save for) coupled with relatively easy credit.
In any event, it does give one pause about the process of paying for education – and the need to confront the system of investing in intangible assets.

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2 thoughts on “That Fed survey on drop in US wealth – and investment in education”

  1. Some of that 80% was always “market froth.” But the S&P 500 seems to be holding up well right now. And the Fed survey was of households – and the drop was mostly in housing prices, not intangibles.

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