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Two-thirds of Americans are holding back on spending

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Stagnant income and the need to save more are limiting consumer spending.

Two-thirds of Americans are limiting how much they spend each month, according to a new Bankrate.com report.

This could be an ominous sign for the upcoming holiday shopping season. Of those limiting their monthly spending, 32% cite stagnant income as the main reason and 29% cite the need to save more. Worries about the economy are a distant third at 16%.

Americans between the ages of 30 and 49 are the most likely to limit their monthly spending, perhaps due to the fact that these are the prime home-buying, car-owning and child-rearing years.

"Sustainable growth in household income is the missing ingredient from this economic recovery." 

"Sustainable growth in household income is the missing ingredient from this economic recovery and the leading culprit for why consumers are holding back on monthly spending," said Greg McBride, CFA, Bankrate.com chief financial analyst. "Worries about the economy have dissipated somewhat over the past year while consumers' desire to forego additional spending in order to save more has increased."

Senior citizens are the most likely to note stagnant income, at almost three times the rate of 18-29 year-olds. This is particularly the case for senior citizens who depend on a fixed income that continues to be plagued by record-low interest rates. Senior citizens are also more likely to worry about the economy than any other age group.

Millennials (18-29 year-olds) are the most likely to cite "need to save more" as their primary reason for holding back spending. This explanation is less common as age increases.

Interestingly, the need to save more is more a common response at higher levels of income than at lower levels, although it is one of the top two reasons cited in both instances.

Bankrate's Financial Security Index increased for the second month in a row, rising to 101.0. This is the highest reading since June 2014. Readings above 100 indicate improved financial security compared to the year before. The Financial Security Index has been above 100 in eight of the first 10 months in 2014.

  • Americans note improvement in four of the five components over the past year: job security, comfort level with debt, net worth and overall financial situation.
  • Only comfort level with savings has deteriorated in the past 12 months.
  • Compared to last month, men are feeling less optimistic about their financial security, while women are feeling better.
  • However, men still note improved financial security versus one year ago while women continue to indicate a slight deterioration in financial security over the past year.

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