More Americans Are Hoarding Despite Holiday Shopping Season
NEW YORK ( MainStreet) The holidays are looming, but almost 72% of Americans are holding back on spending, according to a new report .
"70% of the economy relies on consumer spending, so when this many consumers are cutting back, it's going to be hard for the economy to get out of first gear," says Greg McBride, a CFA and senior financial analyst with Bankrate.com.
The Bankrate study found that 32% cited stagnant income as the reason for cutting back on spending, 20% worry about the economy and 27% say they are not holding back on spending at all.
"With hundreds of thousands of government employees furloughed and many government contractors reeling from the shutdown, feelings of job security plummeted to the lowest level in nearly two years," McBride said.
While 24% cited saving more as a reason to hold back on spending, compounding isn't what it used to be with the national averages for CD rates frozen across all durations since late 2008 when the Federal Reserve began to keep the short-term federal funds rate at a range of zero to 0.25%, according to RateWatch, a premier banking data and analytics service owned by TheStreet.
"The freeze in rates comes as no surprise as economists and market analysts expect the Federal Reserve's latest policy statement to make no change to its economic stimulus program," said Joe Deaux, TheStreet's economics analyst. "Until we see Fed action, savers can expect similar sluggish fluctuation in CD rates."
According to SaveUp.com, the top five things people are saving for include a new car, a gift for someone, a vacation, a computer and a phone.
"Many are still struggling with lower real wages and debt, so feeling cautious on spending this holiday season is an appropriate reaction," said Priya Haji, SaveUp CEO a free reward website for saving money and paying off debt.
On the SaveUp website, the more people save and pay down their debt, the more chances they have to win prizes such as a $2 million jackpot, gift cards from top retail brands, luxury vacations and cash prizes towards financial goals such as student loan repayments.
"If you can't save anything with your current income, think about adding some side income," said Haji. "The key will be to put those extra earnings directly to savings instead of spending it. You should also think about how you can reduce expenses in your household."
Meanwhile, in preparation for the holidays, the NFCC launched the MyHolidayCheckUp.org tool to help shoppers get their financial house in order now before the annual holiday spending season gets into full swing.
After completing a questionnaire related to their household budget, borrowing and spending habits, consumers instantly receive a customized analysis of their current personal financial situation with recommendations based on each consumer's specific circumstances.