The Average Family's Net Worth Is Over $1 Million. But This Doesn't Mean What You Think

You read that right -- the average American family is now worth over $1 million. The average net worth is $1.06 million, to be specific, according to the 2022 Survey of Consumer Finances. That's a survey of U.S. families that the Federal Reserve Board conducts every three years. Net worth, by the way, is a measure of total wealth (the value of all your assets minus your debt).

That figure probably seems hard to believe, or you might be wondering just how many of your friends and family are secretly millionaires. While the numbers are legit, in this case, they're also a little misleading.

The average family's net worth

To clarify, $1.06 million is the mean net worth for families across the United States. The median net worth is $192,900. Here's a quick explanation of the difference:

• The mean is calculated by adding every family's net worth together, and then dividing by the number of families. Mathematically, it's the average.
• The median is the middle number in a data set. In this case, it's found by arranging every family's net worth from smallest to largest, and then taking the one in the middle.

The problem with a mean is that if there are any major outliers, those can skew the data. When that happens, then the mean doesn't accurately represent the average of the group. That's the case here. While the mean may be over $1 million, only those in the top 25% actually have a net worth that high. Those in the top 10% have a mean net worth of $7.81 million, so they're doing most of the heavy lifting, so to speak.

The median of $192,900 is a more accurate representation of the average family's net worth. It's also worth noting that age and income both play key roles. Older Americans have higher average net worths, because they've had more time to accumulate wealth. And a large salary makes it much easier to save and invest.

Ideally, your net worth will increase over time. That probably won't always be the case, as everybody's net worth fluctuates. Home and stock prices go through ups and downs, and these are the most valuable assets for most people. But it is good to make raising your net worth one of your personal finance goals. Now, let's look at how you can do that.

How to build your net worth

The good news is that increasing your net worth isn't complicated. Now, that doesn't mean it's easy. It takes discipline and consistently following a few good financial habits:

Don't get into expensive debt. Credit card debt is one of the biggest wealth killers. Using quality credit cards is smart -- they have lots of potential benefits, including rewards and building your credit score. But make sure to pay the bill in full every month so you don't get charged costly interest.

Set aside money for savings and investments. For your net worth to go up, you need to spend less than you earn. Commit a percentage of your income to building your savings and investments, every month. A good starting point is 10% or 20%, but it can be whatever works for you. What's important is that you're setting aside something.

Invest in the stock market. The stock market has historically been one of the best ways to build wealth. The S&P 500 (an index with 500 of the largest publicly traded companies on U.S. stock exchanges) has delivered an average annual return of 10%, going back decades. If you're not sure where to invest, index funds are a popular choice. These invest in a specific market index, such as the aforementioned S&P 500, and they're available with all the top stock brokers.

Unless you win the Powerball, building your net worth takes time. While it won't happen overnight, if you follow these habits, they'll pay off in a big way.