How to Predict Personal Wealth

It helps to be older. Also, white.

Just as weight, nutrition, and exercise can give you an idea of someone's physical health, a few basic personal characteristics can predict financial well-being with surprising accuracy. Among them: Did you save any money last year? Did you miss payments on any obligations in the past year? And did you have a balance on your credit card after the last payment was due?

This is according to a "financial health scorecard" recently released by the St. Louis Fed, which tracked both financial health and net wealth. Authors William Emmons and Bryan Noeth relied on a series of demographic groupings including age, race and ethnicity, and educational achievement to form 48 non-overlapping groups. While the groupings helped establish correlation across questions, they also revealed some troubling patterns.

Chief among them: While educational attainment has long been considered crucial to expected future financial health, it's not as strongly associated as either age or race and ethnicity (things Americans can't change about themselves). Older families tend to have greater financial health than their younger counterparts, regardless of race and ethnicity or education. And white and Asian families typically enjoy better financial situations than Hispanic and African-American ones, irrespective of other variables.

"This may be due to differences in the economic and financial challenges each group faces and to systemic and historical differences in access to wealth-building institutions and policies, like mainstream financial institutions, employer-provided retirement plans and various types of saving incentives," the authors speculate in their report, while acknowledging they can't establish causation.

In a conversation with National Journal, report author William Emmons elaborated on the point, noting how much better off financially Americans born in the 1930s and '40s, say, tend to be than those born in the 1960s, '70s, and '80s. "It is a little discouraging to think that those factors—when you were born and who your parents are—are strong predictors," he said. But, he adds hopefully, "because it correlates doesn't mean it can't be offset or changed or somehow modified." Education, after all, still plays a very important role.

The findings, which were based on responses from more than 38,000 families who cooperated with the Federal Reserve's Survey of Consumer Finances between 1992 and 2013, suggest agency plays a smaller role in financial well-being than many Americans would like to believe. Which is to say, they don't bode particularly well for the American dream.