What is the average net worth of an African American?

New York(CNN Business) Editor's note: An earlier version of this story and headline misstated the findings of the McKinsey study on wealth. It has been updated and corrected.

An estimated 19% of Black American families, roughly 3.5 million households, have a negative net worth because of a history of discriminatory policies from the government and private industry that has hindered their accumulation of wealth over time, according to a new McKinsey & Company study released Thursday.

Just 8% of White households have a negative net worth today by comparison, according to the global management consulting firm's comprehensive report on the economic state of Black America. An additional 4.3 million Black households have a net worth of less than $10,000, the study's authors said.

The analysis conducted earlier this year examines major occupational and economic gaps facing Black Americans. The study's authors said Black workers make up 12.9% of the nation's labor force, but earn only 9.6% of total US wages.

Disparities hurt broader economy

Employment disparities along racial lines have resulted in a $220 billion annual gap between the wages earned by Black Americans today and what they would be earning if their occupational numbers across business sectors were proportional to their percentage of the US population, the study noted.

"Achieving this scenario would boost total Black wages by 30% and draw approximately one million additional Black workers into employment," the study said.

Lead author Shelley Stewart III says addressing the major wealth disparities between Black and White households has larger implications for the living conditions of all Americans, the study found.

"The lack of participation [by Black Americans] economically has substantial dampening effects for the broader US economy," Stewart told CNN Business.

The study also quantifies how Black Americans, who make up about 13% of the US population, are concentrated in lower-wage occupations and underrepresented in higher-paying careers. Black workers represent just 5% of the nation's physicians and 4.5% of its software developers.

Yet roughly 35% of all US nursing assistants, an occupation with a median wage of just $23,000, and one-third of all security guards and school bus drivers are Black.

"The racial wage disparity is the product of both representational imbalances and pay gaps within occupational categories and it is a surprisingly concentrated phenomenon," the study authors wrote.

Double hurdle of sexism and racism

McKinsey says the advancement of Black women into higher-paying positions is critical to addressing these disparities due to the economic role many play in their families. They cite a September McKinsey analysis of 590 US corporations that determined only 58 Black women are promoted into manager roles for every 100 men of all races.

"Women of all races are less represented in leadership roles, but women of color face double hurdles of sexism and racism," the study authors wrote.

Stewart says these imbalances can't be solved by Black Americans alone. A combination of intervention from both the government and private industry are key.

"We have a particular moment, which unfortunately was prompted by the murder of George Floyd and the disproportionate impact of Covid 19 impact on Black Americans," he said, "to really re-examine that we approach racial justice through this frame of broader economic participation."

Correction: An earlier version of this story misstated how many Black Americans have a negative net worth. It is 3.5 million Black households. It also misstated the figure for White Americans. The study found that 8% of White American households have a negative net worth.

• The average American family has a $748,000 net worth, according to Federal Reserve data.
• But the median net worth is $121,700.
• Data shows that net worth varies across age, race, location, and education level.

The average net worth of American families is $748,800, according to the most recent data from the Federal Reserve's 2019 Survey of Consumer Finances. The Federal Reserve conducts the survey every three years, and it announced in a February press release that it will publish its 2022 study in late 2023.

Between 2016 and 2019, the average American family's net worth increased by 2%.

While the average net worth is upward of $700,000, the median net worth tells a very different story. Calculated this way, the typical American family has a net worth of $121,700. The median, or middle value in a set of numbers, is less sensitive to outliers, so may be a more accurate representation of a typical family. The median shows a very different reality for Americans, and we've included both numbers in this look at American families' finances.

Average net worth by age

Your age has a lot to do with your net worth.

People tend to build up worth in some assets with time. Retirement savings, for instance, grow through compound interest, where interest earns more interest on itself. Home equity, or the value of your home minus any mortgage debt, also tends to increase with time.

Here's the typical American's net worth by age, according to Federal Reserve data:

Average net worth by education level

As the head of household's level of education increases, the average net worth increases as well. The average college graduate has a net worth more than nine times that of the typical American without a high school diploma, and about four times greater than someone who didn't finish college.

It's worth noting though that the median net worth tells a very different story. In median net worth, those who didn't finish college and those who had only a high school diploma have nearly the same median net worth.

Here's how educational achievements play into Americans' average and median net worth:

Average net worth by location

Where you live tends to play a major role in your net worth. While costs of living in America's cities tend to be higher than the costs outside of them, the typical American living in a city tends to have a higher net worth than people living in rural areas.

Average data shows that the typical American in an urban area has a net worth 2.7 times of the net worth of a rural American. In part, higher real estate values in cities could contribute to urban America's higher net worth.

Job opportunities and income also contribute to this unequal distribution of wealth, as high paying job opportunities have left rural America for major cities. Data from the same Federal Reserve study indicates that families living in urban areas saw incomes increase 11% on average between 2016 and 2019, while Americans outside of urban areas saw no average change in income during the same time period.

Average net worth by race

The racial wealth gap is apparent in America's average net worth. The average Black family still has a net much smaller than the average white family, based on the most recent 2019 data.

Here's how the average net worth changes by race in America:

Average net worth by homeownership status

Real estate is a big factor in net worth. Even with a mortgage, owning a home can still contribute to net worth. According to data from the Federal reserve, the average homeowner has a net worth 2.8 times the net worth of the typical person who doesn't own a home.

What is net worth?

Net worth is the total value of assets you own, minus any liabilities or debts. In this study, the Federal Reserveincluded several categories of assets, including:

• Bank accounts, including checking, savings, money market accounts, cash accounts at brokerages, prepaid debit cards, and call accounts.
• CDs, government bonds, and savings bonds
• Health savings accounts
• Investment accounts including 529 college savings plans and individual taxable investment accounts
• Retirement accounts, including IRAs, 401(k)s and 403(b)s
• Cash value life insurance policies and annuities with equity
• Vehicles including cars, RVs, motorcycles, boats, and helicopters
• Real estate, including residential homes

In calculating net worth, liabilities or debts are subtracted from the value of assets amount. In this survey, debts included:

• Mortgages
• Home equity lines of credit or home equity loans
• Credit card balances
• Installment loans, including auto loans and student loans

How to grow your net worth

The best way to build wealth is to play the long game: Decide on your goals now, and start working toward them with small steps along the way. Here are three places to start:

Maximize your retirement savings

Whether you save and invest for retirement through your office's 401(k) or have a solo 401(k) if you're self-employed, starting to save for retirement is one of the most important ways to build your net worth.

If you qualify based on income, a Roth IRA could help you save beyond your 401(k) plan and let money grow tax-free. Atraditional IRA is available to almost anyone at any income level, and can help you lower your tax bill now instead of later.

Start investing now

Whether you want to start building wealth through an investment app or just want to invest automatically without too much management, investing for the long term is another way to grow your net worth.

Opening a brokerage account is the first place to start. There are different types of brokerage accounts to fit your goal, some more specific than others. If your goal is to pay for your child's college someday, opening a 529 planmight be the right fit for your investing. For people who have already hit the maximum limits on retirement investment accounts, putting your investments into an individual brokerage account might be right for you.

Get smart with your savings

Attaining big assets, like real estate, that build your net worth usually involves saving some cash up front. Whether you want to save for the down payment on a house, or build an emergency fund, having the right savings account is critical.

If your savings account is earning .01% interest, it's time to switch savings accounts to an account that helps your money earn more (e.g., the Ally high-yield savings account and Discover online savings account earn a 0.90% APY and 0.85% APY, respectively). A high-yield savings account could help you earn multiple times more interest each month, and help you reach your goals quicker.