Why Americans are Losing Wealth — And What to Do About It

A series of factors have led to declining American wealth, but one thing is for sure: A growing number of Americans are aging without retirement benefits to cover basic costs, and younger generations are facing a decline in wealth. The Federal Reserve has used round after round of quantitative easing, in the hopes of speeding up the recovery through increased lending, but new reports suggest that America is sitting on its money.

There are several steps people can take to eliminate debt and grow wealth, even after the significant recession in 2008 that many are still recovering from.

A report from the Federal Reserve Bank of St. Louis shows that average household wealth has only recently begun to reach half of pre-recession levels. The report also goes on to show that those with the riskiest budgets (those living paycheck to paycheck, and those with heavy debt) were the hardest hit.

Middle and upper-middle-class households used financing to buy things they wanted, and assuming those debts had been paid, everything would have continued as normal. Joblessness, rising borrowing costs, houses going upside down due to foreclosures, and a general lack of saving burst the bubble. Simply put, lavish borrowing contributed to the recession, but it also created jobs.

Companies that had once taken chances on new ideas, and were willing to fail, no longer have a safety net with which to take risks. People lose jobs, and consumer spending decreases as families buy only what they need to get by as a household. Borrowing money, even at a reduced rate, won’t fix the credit crunch or the unemployment numbers that consistently hover near the nine to 10% mark.

Rising housing prices are a good sign, but there is no middle class with cash on hand to buy the properties.

Middle and lower-class individuals are struggling with issues like fees for banking, and other costs that make wealth generation from the bottom up prohibitive. Policies like overdraft charges, combined with transaction ordering, have docked Americans to the tune of millions worth of fees for making basic purchases. Minimum-balance fees on retail checking accounts hurt lower-middle class Americans struggling to break free of the paycheck-to-paycheck lifestyle.

According to MoneyNing.com, each generation has its own share of money challenges that contribute to the problem.  These challenges are all largely a product of the era and economy in which they were born into:

-Boomers (Born 1945-1966): Born into a wealth of opportunity, the Baby Boomer  generation has suffered recently as economic downturns deplete alternative savings accounts, like 401ks and pension plans.

Generation X (1966-1982): This generation as a whole suffers from a lack of savings, and more debt than Boomers. Most have either nothing or only a small amount saved for retirement.

Millennials: Millennials are saddled with some of the highest student debt costs ever experienced. This generation left school and entered an extremely competitive job market with very few openings. While they do show signs of adapting to worsening economic trends, they also stand to lose the most wealth over all.

The solution to eliminating your debt is to go one payment at a time, starting with the most important payments first. The reason that families lost money in the recession was that they relied too heavily on lines of credit, offers for low payments, and a lack of streams of income.

Focus on placing your money into a high interest savings account and leave it alone. CDs are especially great for short and long term savings plans.