Rising Costs Prompt Americans To Scale Back Holiday Spending: 72% Plan To Buy Fewer Gifts This Year

As the holiday season approaches, financial concerns are taking center stage for many Americans. A recent survey by the BMO Real Financial Progress Index reveals that 72% of U.S. consumers plan to purchase fewer gifts this year, a reflection of heightened financial anxiety amid the rising cost of living. In fact, nearly half (47%) of respondents are prioritizing daily living expenses over holiday travel, signaling a shift in how many Americans are choosing to spend their limited resources this winter.

The trend toward more modest holiday spending is evident across a range of demographics. While the average American expects to spend around $550 on gifts this season, many are concerned that this budget will not stretch as far as it did in previous years. Approximately 37% of Americans are cutting back on gift purchases in an effort to save money, while 35% worry that their usual holiday budget will fall short due to inflationary pressures.

Rising Financial Stress

The stress surrounding holiday spending is part of a broader pattern of financial unease. Over the last quarter of 2024, 57% of Americans reported growing concerns about the cost of living. These fears are not unfounded, as inflation has fluctuated in recent months, with Americans experiencing a brief increase in disposable income during the fall, only to face another round of rising prices shortly thereafter.

Despite the financial strain, the desire to maintain holiday traditions persists. However, for many, this will mean rethinking how and where they allocate their resources. Over half (53%) of Americans expressed feeling stressed about their holiday spending, and the concern is even more pronounced among parents. Two-thirds (67%) of parents with children in the household reported financial anxiety over the holiday season, with many anticipating that they will need several months to pay off holiday-related debt.

The Impact of Travel and Gift Spending

Travel plans are also being affected by financial constraints. One-third of survey respondents reported they had been unable to save enough to travel or visit family during the holidays. For many, the combination of rising costs for goods and services, along with an emphasis on daily living expenses, is making it difficult to justify the expense of holiday travel.

Notably, 47% of Americans are choosing to prioritize daily expenses over travel costs this year. This decision underscores the financial juggling act many families are facing, balancing the desire for holiday enjoyment with the need for long-term financial stability.

A Shift in New Year's Resolutions

In light of these challenges, many Americans are reevaluating their financial goals for 2025. More than a quarter (28%) of respondents say they plan to minimize spending next year, with a particular focus on avoiding unnecessary purchases and cutting back on discretionary expenses.

While some consumers, particularly those aged 35 to 54, have indicated they will increase their holiday spending compared to last year, the overall trend remains toward caution. Among this age group, roughly 15% plan to spend more, though this is a notable decline from 22% in 2023. For those who are spending more, the average outlay is expected to exceed $750, up from $690 in 2023.

For older consumers, the situation is similar. Approximately 5.8% of those over 55 expect to spend more, with the average holiday budget rising to over $700 from $613 last year. However, these increases come alongside a heightened sense of financial unease, with many citing "not as much extra income" and "lower confidence in the economy" as primary reasons for reducing their holiday budgets.