How Much Does the Average Homeowner Have in Savings vs. the Average Renter?

Housing is the largest expense for the average American consumer. Since 2020, home prices have skyrocketed, increasing costs for homeowners and renters alike.

The more people have to spend on housing, the less money they have available to spend in other categories, invest or save . But does owning your home instead of renting affect how much you can save?

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The Federal Reserve’s most recent Survey of Consumer Finances suggests the answer is yes. Here’s how the average renter’s savings compare to those of the average homeowner.

Also see the cost of renting versus owning a home in each state.

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Comparing Average Amount Saved: Renters and Homeowners

In 2022, the average renter had $16,930 in savings. That includes all money in savings, checking, prepaid and money market accounts. By comparison, the average homeowner had $85,430, which is nearly $70,000 more than the average renter.

The Survey of Consumer Finances data goes back to 1989, and since then, homeowners have always had more in savings than renters, on average. However, the gap between homeowners’ and renters’ savings has been growing.

In 1995, on average, homeowners had around twice as much saved as renters. Now homeowners have five times more in savings than the average renter.

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The Cost of Renting vs. Owning

Perhaps counterintuitively, renting is often less expensive than owning a home. In the largest 50 metropolitan areas in the U.S., the median cost of renting was $563 less per month compared with the median cost of owning a home with a mortgage, per LendingTree .

The median home price is currently $412,300, and the average mortgage rate is 6.73%, per the Fed. With a 20% down payment and a 30-year fixed-rate mortgage, your monthly mortgage payment would be $2,135, excluding taxes and insurance.

Currently, the median rental price nationwide is $1,987 per month, per Rent . That’s $148 cheaper per month compared with the median mortgage payment. The cost difference between renting and owning a home is more extreme in metropolitan areas.

High interest rates are likely driving most of the higher costs of homeownership. If mortgage rates go down as expected, monthly mortgage payments will decrease.

But despite the higher costs, homeowners still save more than renters.

Reason Behind the Savings Gap Between Homeowners and Renters

So why is there such a big difference between how much renters save and how much homeowners do? One explanation is that rental prices continually increase while the cost of owning a home stays relatively stable after the purchase.

Say you buy a new home with a 30-year fixed-rate mortgage. Your monthly housing costs will be stable for the 30 years of the loan. After you’ve paid off your mortgage, you’ll have to pay only taxes, insurance and maintenance.

Unexpected maintenance costs, such as roof damage or broken pipes, can eat into a homeowner’s savings, whereas renters don’t have to pay for these costs out of pocket since they’re the landlord’s responsibility.

However, renters do have to cover rising rental rates nearly every year. Since 2019, rent prices have increased by around 19% nationwide. President Joe Biden did propose a 5% annual rent increase cap in July 2024, but the proposal would need to pass in Congress to become law.

Rising rent prices can take up larger and larger chunks of renters’ budgets. As their housing costs increase, they have less money to put toward savings and other financial goals. By comparison, homeowners have more of their income to put into savings after paying off their mortgages.

How To Increase Your Savings as a Renter

If you’re a renter hoping to save more, try these strategies.

• Pay off debt with high interest rates: High-interest debt can prevent you from building your savings. Start by paying off any loans with high interest rates, like credit card debt.
• Live with a roommate: Splitting your housing costs with a roommate will give you extra money each month to put toward savings.
• Renegotiate with your landlord: When your lease is up and it’s time to sign a new one, negotiate your monthly payment. If your landlord charges more than the market rate, it may be worth moving to a more affordable home.

Finally, remember to put at least some of your savings into a high-yield savings account so you can grow your money.

This article originally appeared on GOBankingRates.com : How Much Does the Average Homeowner Have in Savings vs. the Average Renter?