Asset poverty is an economic and social condition that is more persistent and prevalent than income poverty. It can be defined as a household’s inability access wealth resources that are sufficient enough to provide for basic needs for a period of three months. Basic needs refer to the minimum standards for consumption and acceptable needs. Wealth resources consist of home ownership, other real estate (second home, rented properties, etc.), net value of farm and business assets, stocks, checking and savings accounts, and other savings (money in savings bonds, life insurance policy cash values, etc.). Wealth is measured in three forms: net worth, net worth minus home equity, and liquid assets. Net worth consists of all the aspects mentioned above. Net worth minus home equity is the same except it does not include home ownership in asset calculations. Liquid assets are resources that are readily available such as cash, checking and savings accounts, stocks, and other sources of savings. It is also important to note that there are two types of assets: tangible and intangible. Tangible assets most closely resemble liquid assets in that they include stocks, bonds, property, natural resources, and hard assets not in the form of real estate. Intangible assets are simply the access to credit, social capital, cultural capital, political capital, and human capital.
There are trends in the development of asset poverty over time and several factors that cause certain groups to fall into asset poverty more easily than others. Changes in these factors and structures have occurred over the years, but asset poverty is continually higher than other forms of poverty such as income poverty. The reason for this difference is that asset poverty accounts for a household’s total wealth, and not just the current income level. It provides a more accurate description of a household’s true financial state. Wealth leads to increased economic security and assets create a form of security during hardship. One can use assets to pay for further education, better housing, or to maintain a certain standard of living after retirement. Households lacking sufficient assets are forced to live from paycheck to paycheck and face economic hardship when changes in income occur. Those who lack adequate assets are unable to seek a better lifestyle and improve their quality of life because they lack the financial resources to do so.