What California's wealth gap means for every resident's financial future

SACRAMENTO, Calif. — A new report from the Public Policy Institute of California shows stark disparities in wealth, but also point to tools and strategies that Californians — and policymakers — can use to build financial stability, invest in the future and prepare for retirement.

Tess Thorman, Shannon McConville and other PPIC researchers looked beyond just income to focus on wealth: what Californians own (like their houses, cars and retirement accounts) minus what they owe.

Their findings offer a revealing picture of household wealth across the state.

”There are a number of things that I think the average Californian can learn from this,” Thorman said in an interview. “People often confuse income and wealth. Income is what you bring in over a month or a year — it meets your basic needs. But wealth is what underpins that—it allows people to fill in when income declines. It allows you to make an investment in the future.”

While average Californians tend to think about income when budgeting for rent, groceries, or childcare, wealth is what keeps everyone afloat during hard times and opens doors to opportunity—like starting a business, sending a child to college, or retiring comfortably.

According to the report, the median household in California has a net worth of around $288,000—higher than the national median of $180,000. That sounds promising, but masks deep divides.

For instance, Thorman and McConville noted, older Californians (65 and up) have six times the net worth of those under 35. College graduates typically hold much more in retirement savings and home equity than those without degrees. Racial disparities remain stark: white and Asian households have median net worths above $500,000, while Latino households average just $62,000.

Can Californians weather a financial storm?

While some Californians can weather a financial setback, many can’t. Wealth offers near-term security when life throws a curveball, but for many households—with little or no savings, high debt, or no home equity—there’s no cushion.

Three out of four California households carry some kind of debt, and about 7% have more debt than assets, placing them in negative territory.

Thorman noted that these challenges are not just individual—but shared across the state.

“Everybody is experiencing the high cost of living,” she said. “The challenges of being able to invest and to build up assets over time — those are things that are driven by forces impacting the entire economy over long periods of time.”

Californians carry less medical and other types of debt than residents of other states, thanks in part to expanded Medicaid coverage. But about one in 10 still report difficulty affording care — draining savings and delaying other investments.

Building for the future — and retirement

For many, the path to long-term financial security runs through home ownership, retirement savings, business ownership and other types of assets.

Yet, with sky-high housing prices and uneven access to credit, fewer people are buying homes. Just half of Californians own their homes, compared to nearly two-thirds nationally. Among those who do, home equity is a major component of net worth — but not always one that can be tapped when needed.

“There’s often a lot of focus on home ownership because home equity is typically the largest value asset that Californians have,” Thorman explained. “But home ownership is not guaranteed to build wealth.”

Low-income families, in particular, are more vulnerable to needing to pull out equity when income drops — and that can undermine the long-term investment, Thorman said.

“If you have to pull out that equity earlier, that means maybe as an investment, it doesn’t pay off,” she said.

Retirement savings, another pillar of long-term security, also reflect deep disparities, the researchers found. Households with college degrees are more likely to have retirement accounts — and much larger balances. Latino households are the least likely to have any retirement savings at all.

What can California, local policymakers do?

Thorman and McConville stress that while individuals can make informed financial decisions, public policy must also rise to the challenge.

“Individuals should educate themselves about their finances, make choices that are right for them and be aware of state and local resources that they could be eligible for,” Thorman said.

To be clear, though, the big-picture challenges for building up assets are shared, she said.

“Everybody is experiencing the high cost of living, the challenges of being able to invest and to build up assets over time,” she said, “and those are things that are driven by forces impacting the entire economy over long periods of time. So the individual response isn’t going to necessarily change that big picture.”

That’s why policy changes must be studied and implemented. Programs already making a difference include CalHFA’s first-time homebuyer assistance and shared equity models in San Francisco and Los Angeles that help families access homeownership while limiting future debt burdens. These programs may not yield dramatic long-term wealth, the researchers said, but they offer important footholds.

They pointed to other efforts: CalSavers automatically enrolls workers in retirement accounts when employers don’t offer them. Initiatives such as CalKIDS and Oakland’s Brilliant Baby seed college savings accounts for low-income families. Financial literacy efforts, including a new high school graduation requirement by 2030, aim to equip future generations with the tools to make smart money decisions.

“The supports that government offers are about really specific issues,” Thorman said. “Most of us aren’t thinking about our overall net worth, so much as we’re thinking about meeting our needs in individual areas.”

That’s probably why you can’t find information on all of these programs in one place, Thorman said, but the report highlighted them and attempted to analyze whether each of them is having an impact on California residents’ net worth.

“There’s usually evidence, at least some evidence, saying that these programs help do the thing that they are trying to do,” she said, “but there isn’t a lot of research on how they increase net worth in the long term. So there’s a lot of space there for for learning more about how they help build wealth over the course of life.”

As the report makes clear, wealth isn’t just about money in the bank — it’s about having the resources to survive hard times, invest in your dreams, and retire with dignity. And while many Californians are doing well in these areas, PPIC experts showed that too many are falling behind.