The Middle Class Has Been Divided Into 5 Categories And The One You’re In Determines How Much Money You Need To Live

In 2024, 54% of Americans defined themselves as being part of the middle class, which is a decrease from previous years. As the economy changes, the debate over what actually constitutes the middle class these days is ongoing.

According to content creator Freddie Smith, it all comes down to housing and childcare. Smith, who regularly posts news and critiques covering the U.S. economy and social trends, argued that there are five categories within the middle class in a TikTok video. These categories are largely based on if and when you purchased a home and if you pay childcare costs.

Here are the 5 categories of the middle class that determine how much money you need to live:

1. People who bought a home before 2020

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Smith's first category was those who bought a home before 2020, who usually have an interest rate under 4%. “Their mortgage out the door is around $1,500,” Smith said before breaking down how having kids changes the economic equation.

“Let’s say they have no kids or their kids are in junior high, so they have no daycare. Their housing and daycare bill is $1,500 a month,” Smith noted. This is a fairly affordable cost of living that should keep them closely in line with the average American's monthly expenditures.

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2. People who bought a home before 2020 and pay for daycare

Smith explained that the second middle-class group is similar to the first, but they also have kids in daycare, which changes their economic standing. Daycare costs about $1,000 a month for just one child, which leads parents and anyone who cares about future generations to wonder why the government hasn’t stepped in to subsidize the cost of something so essential.

He estimated that this sector of the middle class probably spends roughly $2,500 on childcare each month. “So, they’re now spending $4,000 just on housing and daycare," he concluded. That's quite a jump from the first group.

3. Millennials with high interest rates

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According to Smith’s math, this group of people bought homes with interest rates ranging from 6% to 8%, meaning their mortgage is $4,000 a month. They don’t have kids yet, so they’re not paying childcare costs, but that isn't necessarily an advantage.

Smith noted many in this group are struggling so much to stay afloat financially that they've decided to wait to see if they can even afford to become parents. 36% of childless adults under age 50 said they made the decision because of affordability concerns, and with numbers like these, it's not hard to see why.

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4. People who aren’t buying property

These people haven’t bought property and don’t plan to do so. Smith said their rent and daycare costs are about $2,500 a month each.

“That’s $5,000 a month for rent and daycare,” he explained. “And you wonder why that group’s saying, ‘How do I save for a down payment?’” It's not surprising that a majority of renters believe they'll never escape that cycle and reach the milestone of homeownership.

5. People with high interest rates and daycare costs

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This section of the middle class is hard hit on all sides. Interest rates of 7% to 8% mean they're paying $4,000 a month for housing, plus the typical daycare cost of $2,500 a month. “So, just on housing and daycare is $6,500 a month,” he explained.

“This family would have to make $100,000 basically just for housing and daycare,” Smith stated, getting down to the crux of his argument. “You can see why those people are saying, ‘$150,000 is the new middle class.'" This shows the distinct sense of dissonance that even exists within the middle class because the first group believes they're "crushing it off $80,000 a year."

Smith said, "this is probably the first time in history" when people's status as parents and homeowners determines their position in the middle class, or if they're even in the middle class at all. Everyone should be able to etch out the future they want for themselves regardless of income. The fact that this generation's life decisions depend so deeply on how much money they make is more bitter than sweet. It’s no wonder so many young adults feel disillusioned with their options and unsure of their future.

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Alexandra Blogier, MFA, is a writer who covers psychology, social issues, relationships, self-help topics, and human interest stories.