Lower class, middle class, and upper class are all widely used, but rarely defined terms. For some people, lower class means living in poverty, upper class means a life of luxury, and middle class is everyone else.
Thanks to reports by the U.S. Census Bureau, we can get a much more accurate idea of what these terms mean financially. There are two reports that are useful here:
- Income in the United States: 2021 provides a breakdown of household income by quintile, so we can see the bottom 20% of incomes, the next 20%, and so on, up to the top 20%.
- The Wealth of Households: 2021 provides the median wealth of households at each income quintile.
If you're interested in how much the typical household in each group is worth, how much money they make, and where your own personal finances land, you'll find the answer below.
Average net worth for the lower class
- Median net worth: $12,000
- Income: $28,007 or less
The bottom 20% of earners make up the lower class. Household incomes top out at $28,007, which is well below the average U.S. income.
This is a good time to clarify that these terms are only based on someone's current net worth and income. Many young adults and students will be in the lower class because they haven't had time to build their careers and net worth yet.
Average net worth for the middle class
The middle class is a broad group of people, so it's separated into three categories: Lower middle class, middle class, and upper middle class. Here's the financial data for each one.
Lower middle class
- Median net worth: $61,260
- Income: $28,008 to $55,000
The lower middle class consists of those in the 20th to 40th percentile of household income. That makes a sizable difference, as this group has a median net worth more than five times greater than that of the lower class.
Middle class
- Median net worth: $145,200
- Income: $55,001 to $89,744
The middle class consists of those in the 40th to 60th percentile of household income. Their median net worth is nearly two and a half times that of the lower middle class.
Upper middle class
- Median net worth: $269,100
- Income: $89,745 to $149,131
The upper middle class consists of those in the 60th to 80th percentile of household income. The median net worth is nearly double that of the middle class.
Average net worth for the upper class
- Median net worth: $805,400
- Income: $149,132 or more
The top 20% of earners are the upper class. There's a significant difference in wealth for this group. Their median net worth is about three times that of the upper middle class and about 67 times more than that of the lower class.
Does class matter?
It's interesting to see what kind of net worth and income correspond to each class. Keep in mind though that these are just terms, and where your own numbers fall isn't really what matters.
Net worth matters. It's one of the better ways to measure how you're doing financially. Over the course of your career, if your net worth is increasing, it's a sign you're managing your money well. Income also matters. You don't need to make a huge salary, but a high income certainly has its benefits.
So, for your own financial health, it's a good idea to get into these financial habits:
- Spend less than you earn.
- Save and invest money every month.
- Contribute to retirement accounts.
- Look for opportunities to increase your income.
These habits will all grow your net worth and potentially your income, meaning they could help you move up in "class." But being part of the middle class, the upper middle, or the upper class isn't the point. What matters is managing your own finances well, so you're comfortable and happy with where you're at.
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As a financial expert with a profound understanding of economic indicators and class structures, I can provide valuable insights into the terms lower class, middle class, and upper class, drawing on extensive knowledge and data. My expertise is grounded in a deep understanding of reports from authoritative sources such as the U.S. Census Bureau, which plays a pivotal role in shaping our understanding of income distribution and wealth disparities.
Let's delve into the information presented in the article:
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Income in the United States: 2021 and The Wealth of Households: 2021 Reports: The U.S. Census Bureau reports, specifically "Income in the United States: 2021" and "The Wealth of Households: 2021," offer a comprehensive breakdown of household income by quintile and provide insights into the median wealth of households at each income quintile. This data forms the basis for understanding the financial dynamics of different social classes.
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Lower Class:
- Median Net Worth: $12,000
- Income: $28,007 or less
- Constitutes the bottom 20% of earners.
- Important to note that these terms are based on current net worth and income, making them particularly relevant for young adults and students who may be in the lower class as they are still building their careers and net worth.
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Middle Class:
- Lower Middle Class:
- Median Net Worth: $61,260
- Income: $28,008 to $55,000
- Represents the 20th to 40th percentile of household income.
- Middle Class:
- Median Net Worth: $145,200
- Income: $55,001 to $89,744
- Encompasses the 40th to 60th percentile of household income.
- Upper Middle Class:
- Median Net Worth: $269,100
- Income: $89,745 to $149,131
- Includes those in the 60th to 80th percentile of household income.
- Lower Middle Class:
-
Upper Class:
- Median Net Worth: $805,400
- Income: $149,132 or more
- Comprises the top 20% of earners.
- Notable wealth disparity, with a median net worth about three times that of the upper middle class and approximately 67 times more than that of the lower class.
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Financial Health and Class Dynamics:
- The article emphasizes that while these class distinctions are interesting, what truly matters is managing one's finances effectively.
- Net worth is highlighted as a significant measure of financial well-being over one's career.
- Income is acknowledged as important, with higher income having its benefits.
- Practical financial habits are recommended, including spending less than you earn, saving and investing, contributing to retirement accounts, and seeking opportunities to increase income.
In conclusion, the provided information offers a nuanced understanding of class structures based on financial indicators, encouraging individuals to focus on managing their own finances effectively rather than fixating on class labels.
