Since 2014, a relatively stable 65% of Americans say they are limiting their spending. But with incomes once more on the rise (up 5.2% in 2015), the reason that the percentage isn’t changing is not stagnant incomes. Rather, Americans simply want to save more money.
According to the latest Financial Security Index from Bankrate, 30% of survey respondents say the reason they aren’t spending more is because they need to save more. Another 25% say they have limited spending because their incomes have not risen.
It doesn’t take a Nobel-prize winning economist to figure out that if American consumers spend less, then companies that make products Americans buy will make less. And if U.S.-based companies make less, then they need to spend less on employees and capital equipment.
As wages rise, especially at the lower end of the scale, spending should pick up because these are the consumers who most often need to buy more. When consumers buy more, American companies can hire more employees and invest more, and a virtuous cycle begins. At least that’s one theory.
The Bankrate researchers noted that the percentage of respondents who said they were spending less because their incomes were stagnant has dropped in each of the past two years. Just 15% of those surveyed said that fears about the U.S. economy are restricting their spending, the lowest level in the four years that Bankrate has conducted the survey.
Millennials (aged 18 to 35) were most likely to say (48%) that saving was their primary reason for limiting their spending, while 58% of those surveyed aged 71 and older worried most about stagnant income. No surprise there since most older Americans are living on fixed incomes.
For additional details and some consumer stories, see the Bankrate website.