According to the Federal Reserve’s Survey of Consumer Finances, the median family net worth in the United States is $192,000. But what exactly is net worth, and why does it play such a crucial role in understanding financial health?

Yahoo Finance reporter Molly Moorhead breaks down the concept, its implications, and how to calculate it.

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This post was written by Angel Smith

Video Transcript

The median net worth for families in the US was a little bit over 100 and $92,000 according to the Federal Reserve.

But what exactly is net worth and why is it important?

So to break it down for us, we’ve got Yahoo Finance’s very own Molly Moorhead here with us.

I mean, what is it at the end of the day?

Well, literally, it is what you own minus what you owe.

And the reason it matters is that it’s a good gauge of where you are financially your financial health.

Uh, it’s like a personal economic indicator of how you’re doing.

OK, so we’re looking at the calculation here on the screen.

I mean, what else is taken into account when we think about what you own versus what you owe here?

Yeah, So what you own or your assets?

And, uh, it’s you’re you’re gonna add up all your, um, balances in your bank accounts, your balances in your retirement or investment accounts if you own real property, like a home.

All of that, uh, minus your debts.

So if you have student loans, if you have a mortgage, anything you owe money on is subtracted from the total of your assets, and that gives you a number that is generally speaking lower.

The younger you are might even be negative if you graduate college and you’ve got a bunch of student debt.

Um, but then over time, the hope would be as your salary increases your, um, investments grow that it will.

It will incr.

The number of your net worth will increase.

So once you calculate it, how do you track your net worth over time?

Yeah, Um, so your financial advisor is a great resource here.

They, um they can kind of give you that big picture look, and they’ll, um, show you how you’re doing toward bringing up your net worth.

And then you know, your bank or your If you have a a fidelity or Vanguard account, they often can let you, uh, link all your accounts, plug in all your numbers and it’ll show it to you.

Or you can do, uh, you know, the old school spreadsheet.

And it really is a good idea to track it, because I think it can be motivating.

So it’s and I’m not saying track it every week, but a couple of times a year.

You see that?

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You know that debt number come down as you’re paying off?

Um, you know, a credit card or whatever, and the money you’re putting in savings is growing.