Many Americans are reprioritizing their holiday spending and plan to reduce spending in 2025 because of inflation concerns, according to data from the BMO Real Financial Progress Index.
The average American expects to spend $550 on gifts this holiday season, but many say that amount will buy less than in the past. As a result, 72% believe they will give fewer gifts this year, with 37% planning to buy fewer presents to save money and 35% planning to spend the same but expecting to buy less with that money.
“The holiday season is a time to reconnect with loved ones and celebrate the end of a year, but understandably many are stressed about how to balance holiday expenses with rising everyday costs,” said Paul Dilda, Head of Consumer Strategy, BMO. “For those feeling the financial anxiety this winter, making a clear plan to track spending across the holidays and establishing a manageable budget for the new year can help ensure that you stay on track to make real financial progress.”
However, retailers got some good news on Tuesday as November retail sales reportedly beat Wall Street expectations. November retail sales rose 0.7%, better than projections of a 0.6% rise, according to Bloomberg data. In addition, October retail sales were corrected up to 0.5%. The November figure indicated a stronger-than-expected start to the holiday shopping season.
BMO Financial Services reported in a news release that many Americans are more anxious about their daily expenses. During the fourth quarter of 2024, 57% said they are increasingly concerned about the cost of living.
“The cost-of-living battle has been two steps forward, one step back with Americans experiencing a much-needed gain in disposable personal income in the fall just to be met with an uptick in inflation over that same period.” said Scott Anderson, Chief U.S. Economist, BMO. “Yet many are still willing to pay for festive cheer even while feeling anxious about the cost of living, driving some overall holiday spending growth.”
According to BMO, 53% of Americans say they experience financial stress over holiday spending. Parents are concerned about spending this winter, with 67% reporting anxiety over the cost of the holidays. Among parents with children in the household. 35% of will need four months or more to pay off holiday debt. About a quarter of Americans will need at least three months to pay off gift expenditures.
In addition to reducing the number of gift purchases, many Americans are traveling less. One third could not save enough this year to take a holiday vacation or travel to see loved ones, and 47% are prioritizing living expenses over travel.
In light of their inflation concerns, many Americans are adjusting their New Year’s resolutions, with 28% planning to minimize spending in 2025.
“The New Year is the perfect time for anyone who is concerned about their finances to chart a path to real financial progress,” Dilda added. “Rising costs can feel overwhelming, but taking simple steps throughout the year can help you feel further ahead and better prepared when the next holiday season rolls around.”
The BMO Real Financial Progress Index is designed to reveal how consumers feel about their personal finances and whether they are making financial progress.
