While inflation eased up a bit in October — it decreased to 7.7%, according to the Consumer Price Index (CPI) data — Americans are still feeling the pinch of soaring prices in every corner of their lives. Not surprisingly, 33% of Americans say they will cut back on spending this holiday season, according to a new GOBankingRates survey.
However, there are generational disparities in terms of how much American consumers will cut back — and on which items, the survey found.
“With personal loan debt skyrocketing to new record highs, it will be interesting to see whether spending continues over the holidays or whether we see Americans scale back on added expenses,” said Tomas Campos, CEO and co-founder at Spinwheel. “Young people, in particular, are feeling the crunch — in January of 2022 Gen Z had an average of $2,443 in credit card debt and $20,900 in student debt — and nearly 50% of them are considering turning to alternate payment options like BNPL to pay for the holidays.”
Overall the GOBankingRates survey found that older generations are the ones most likely to say they plan to spend less this holiday season. Leading the sentiment is the 45-to-54 age group, with 42% of them saying they will cut back. Following this cohort are the 55-to-64 age group close behind at 41% and the 65-and-over group at 39%.
“It’s no surprise that older generations plan on cutting back on spending and traveling this holiday season given rising inflation coupled with the changes in the investment market and negative impact to most people’s retirement savings,” said Jeanniey Walden, CIO of DailyPay. “Adversely, while younger generations are also feeling the sting from inflation, they have been able to benefit financially from increased pay rates and creative benefits introduced during the Great Resignation and prevalent in today’s competitive market.”
Indeed, the survey shows that 31% of the 18-to-24 age group say they plan on spending less, and that number dwindles to 24% for the 25-to-34 age group. What’s more, these younger generations say they also actually plan on spending more than last year. The 18-to-24 and 25-to-34 cohorts are the largest slice of the population making this statement, both at 42%.
The survey also found that cutting back on spending translates into different things for different generations. See how the different generations plan to save money this season.
For Some, Food Won’t Be the Same
Food for entertaining is the top holiday expense where Americans overall say they have noticed rising prices — at an overwhelming 78% — so it’s no surprise that cutting turkey will be on the menu for many of them.
Indeed, turkey is one of the biggest expense items, estimated to be 23% higher in price than last year in the fourth quarter, according to Wells Fargo. Complicating the matter and further impacting prices, “[t]urkey supplies will also be more limited this year due to continuing impacts of Highly Pathogenic Avian Influenza,” Wells Fargo analysts said.
But which generation intends to cut it from the menu?
According to the survey, it’ll be the younger generation — even though the tradition seems to remain robust despite inflation. The survey found that 13% of the 18-to-24 age group say they plan to eat something other than turkey as part of a holiday tradition change due to inflation.
On the other hand, the older generations intend to keep the star of the holiday on the table, with only 4% of the 55-to-64 age group and 5% of the 65-and-over group saying they will eat something other than turkey this year.
“Even with inflation, tradition is something that is priceless to many Americans,” said Bobbi Rebell, CFP, author of “Launching Financial Grownups” and personal finance expert at Tally. “Unlike ongoing expenses like filling up a gas tank, or paying higher prices for everyday items, one item on a holiday is something many are willing to splurge on.”
Expect Fewer Gifts To Be Given
The biggest cut in spending this year results in Americans buying fewer gifts, with 33% overall saying they’ll do this. Across generations, the 55-to-64 age group plans to do this the most at 42%. Again, this is not surprising, as the survey shows that 73% of Americans say that gifts are a holiday expense where they’ve seen price increases.
“The past couple of years of Covid-19 allowed many consumers to see the benefits of simplifying their lives,” Rebell said. “That can include downsizing their holiday gift list. Let’s face it- smaller gatherings and time away from our more distant friends and acquaintances have made it easier to cut back on spending. Also, with many of us working from home, we may no longer feel as much of an obligation to buy gifts for our co-workers.”
Americans also plan to cut back on shopping even for themselves by not buying a live Christmas tree, with 7% overall.
Who Is Skipping Out on Traveling?
In addition, having to skip travel is another way inflation is affecting some Americans — but it affects the younger generations the most. Indeed, 20% of the 25-to-34 age group say they will skip traveling for the holidays this year, and 19% of the 35-to-44 age group say the same. On the other hand, only 5% of the 65-and-over age group and 7% of the 55-to-64 age group say they will skip traveling.
“Older demographics seem to be holding on to the tradition of traveling for the holidays the most- perhaps because they may have more financial resources available to pay for the rising cost of travel, and have avoided traveling more during the pandemic because people over the age of 50 were considered more vulnerable to Covid-19,” Rebell said.
Those Who Aren’t Changing Any Plans
Finally, a key finding of the survey is that despite inflation, a whopping 33% of Americans say they do not plan on changing any of their holiday plans. The sentiment is stronger among the older generations, with 41% of the 65-and-over age group and 38% of the 55-to-64 age group.
“These numbers are actually dramatic when you look at the reverse- how many are changing something in their holiday plans,” Rebell said. “While specific traditions like a turkey, which may be more expensive but still an affordable splurge, seem to be continuing, we’ve also learned nothing terrible really happens when we change with the times. Many people will be doing different things this holiday season and it will be fascinating to see how it evolves.”
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Methodology: GOBankingRates surveyed 1,025 Americans aged 18 and older from across the country between October 17 and October 21, 2022, asking eighteen different questions: (1) Do you plan on spending more or less on holiday shopping this year?; (2) With the current state of inflation how much more do you expect to spend on holiday shopping this year?; (3) What is your favorite place to shop for the holidays?; (4) Do you have to change any of the following holiday traditions this year due to rising costs?; (5) Where do you do a majority of your holiday shopping?; (6) Do you plan to work in retirement?; (7) How much time do you take off from work during the holidays?; (8) How much would you typically spend on a gift for a family member?; (9) How much would you typically spend on a gift for a friend?; (10) Where have you noticed rising prices for holiday shopping/expenses this year? (Select all that apply); (11) When did you start or plan to start your holiday shopping this year?; (12) As the holiday season approaches, which of the following applies to you?; (13) How much do you plan to spend exclusively on gifts this holiday season?; (14) How much do you plan to spend on travel during the holidays?; (15) Who do you tip for the holiday season?; (16) Do you tip extra to service workers (food delivery, Uber, hairdresser, etc.) during the holidays?; (17) What is the primary way you plan on paying for your holiday spending?; and (18) What holiday purchases do you make at the dollar store? (Select all that apply). GOBankingRates used PureSpectrum’s survey platform to conduct the poll.