Middle Class Savings: An Oxymoron?

Last updated on July 8th, 2022 at 05:40 pm

Now that I have decided to start disciplining myself to save money, I’m confronted with a problem. See if you can help me with it. Is the phrase “middle-class savings” an oxymoron? Or how about this: can you even have a middle class without savings?

If we in the middle class can’t afford savings doesn’t that kind of make us…not really middle class?

Indeed, to answer that question, we first have to define who, exactly, is the middle class. We talk a lot, and hear a lot, about the middle class, but it’s a phrase that’s thrown around without many definitions for most of us.

Candidate Obama proposed that the middle class was anyone making less than $250,000. That was his proposal for cutting off the Bush tax cut extension. Six months later, some Democrats started talking about $500,000 as the upper limit for the middle class. A couple of people even proposed $1 million.

As Virgo Man would say, those people need to put down the crack pipes and get real. Who ever heard of a millionaire middle-class household? Not me.

While pondering this question, I ran across CBS money blogger Carla Fried’s assertion that middle class means something around $50,000. That was the median household income in 2009. To refresh you on your middle school math, the median is the point where half of the household incomes are below and half are above – the very definition of “middle.”

But here’s the strange thing. Apparently, “middle class” is a state of mind, more than a statistical definition, for at least some people who think of themselves as middle class. I say that because Fried also reports a survey where 40% of Americans with incomes less than $20,000 considered themselves middle-class.

Objectively speaking, I don’t think there’s any question that $20,000 is below middle class. If the median is $50,000, then it’s significantly below the middle class. Still, quite a few people in that income range think of themselves as middle class.

That just goes to demonstrate that belonging to the middle class is aspirational. No one wants to be poor. Everyone aspires to the middle class (or even beyond). If the money isn’t there to prove middle-class membership, then maybe the perceptions are a steady job (even if it only pays $9 an hour), a roof over one’s head (rented), and food on the table (20 Chicken McNuggets for $4).

Then we have Don Peck, author of the series Can the Middle Class be Saved? which ran in the September 2011 issue of Atlantic Monthly. He quotes a Citigroup analytical report as saying there are only two distinct classes in America today: the rich, and the rest. The report suggests that only the rich matter for Citigroup’s purposes because that’s where all the disposable income is. For full impact, let me give you the whole paragraph where Peck summarizes the report.

In fact, they said, America was composed of two distinct groups: the rich and the rest. And for the purposes of investment decisions, the second group didn’t matter; tracking its spending habits or worrying over its savings rate was a waste of time. All the action in the American economy was at the top: the richest 1 percent of households earned as much each year as the bottom 60 percent put together; they possessed as much wealth as the bottom 90 percent; and with each passing year, a greater share of the nation’s treasure was flowing through their hands and into their pockets. It was this segment of the population, almost exclusively, that held the key to future growth and future returns.

By now, this is not news. We all know that 99% of the wealth is concentrated in 1% of the individuals. Still, doesn’t it shock you to hear it coming from a financial institution? It shocks me. I hope I never get over being shocked because if I do, that means I’m starting to accept it – like a broken tooth that I could get fixed, but why bother? I’m used to it now.

When a business starts thinking the middle class is inconsequential, we’ve got problems. Just ask Marie Antoinette, who got her head chopped off for thinking the people she ruled were inconsequential.

But I digress. Let me return to the bottom line.

I propose that one definition of the middle class is enough income to afford savings.

That means the basic needs are met: there’s a roof overhead, a steady job with reasonable pay, and a readily available, safe, and affordable food supply. You can get a decent, affordable, relevant education for your children, and affordable health care is easily within reach. Leisure time is not a luxury, not demonized, and is available to balance out the demands of work. The average citizen can drive down a road without hitting a pothole and bending the drive shaft. Civic life is both rich and civil, not constrained or violent.

And, after all that, there’s a little money left over to save. You can save up to buy a reasonably priced house in a reasonably safe neighborhood. You can save up for a trip to the Bahamas. You can save up to send your daughter to Harvard. You can save up for your retirement. Sure, you may have to trade some things off to maximize your savings, but the bottom line is: that it’s possible to save. You have the choice to save. To me, it’s not the middle class without that.

Statistically, I am not presently in the middle class. Aspirationally, I am – but barely. Savings-wise, we’ll see how the month goes.

Jayne Speich