Demographics of families owning Savings Bonds

The Federal Reserve recently published a paper called Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances.

The survey looks at how many US families (including one-person households) owned various kinds of assets and had various kinds of liabilities in 2004 and makes comparisons with earlier surveys done in 1995, 1998, and 2001.

One of the asset classes included in the survey is US Savings Bonds. The following graph shows the percentage of families in various demographic groups that owned Savings Bonds in 2001 and 2004.

The two horizontal lines in the graph represent the overall market penetration of Savings Bonds. In 2004, 17.6% of families owned Savings Bonds; in 2001, 16.7% did.

The first two groupings look at income and net worth percentiles. The first bars in each group represent families in the lowest percentile of income (<20th) and net worth (<25th). For income, the other percentile groups are 20-40, 40-60, 60-80, 80-90, and 90+. For net worth, the other percentile groups are 25-50, 50-75, 75-90, and 90+.

The third grouping looks at the age of the head of the family (<35, 35-45, 45-55, 55-65, 65-75, 75+). The next looks at the work status of the head of the family (employed by someone else, self-employed, retired, not working). The next looks at home ownership (owner, renter) and the last looks at race/ethnicity (white non-Hispanic, non-white or Hispanic).

After looking at the data, do you still think Savings Bonds are a frumpy investment? The groups in which more families own Savings Bonds than average are high income, high net-worth, home-owning, white non-Hispanic families, led by a person who is 35-55 years old and employed.

While we could guess a lot of that, isn’t it a surprise that fewer families in which the head is older than 55 or retired tend to own Savings Bonds?

Other data in the survey, however, indicate that the older, retired families that do own Savings Bonds own a lot more of them than other families. The following graph shows the median Savings Bond holdings for various types of families. Note these aren’t averages – median means half the families in each group own more than the value shown and half own less.

Once again we see the higher income and net worth groups popping above the lines showing the median holdings for all groups. The surprises are the differences from the first chart in age and work status, where the older families and the retired families who do own Savings Bonds tend to have large investments.

Moreover, families in the two groups headed by someone over 65 greatly increased their Savings Bond holdings between 2001 and 2004; the expectation would be that their holdings would decrease, as they did for retired people.

But the largest jump in holdings suprisingly belongs to those who were not working, which no doubt reflects more formerly high-income people being unemployed in 2004 than in 2001.