’Tis the season for tighter budgets.
Holiday spending in the U.S. is expected to fall 5% this year, driven largely by Gen Z’s sharp 23% pullback, according to a survey from a leading consulting and accounting firm.
Households plan to be more deliberate in their spending over the holidays, prioritizing value and deciding what to splurge on and where to scale back, says PwC’s 2025 Holiday Outlook, which was released Wednesday.
The decline in planned spending underscores how economic uncertainty is affecting consumer sentiment heading into the most important retail season of the year.
Gen Z’s outlook this year is a stark reversal from 2024, when their projected holiday budgets surged 37%. (Their actual holiday spending rose a more modest 6%, according to PwC’s analysis of credit and debit card panel data.) PwC’s new survey found that 25% of Gen Z say their financial situation is worse than it was last year, compared with 17% who said the same in 2024.
Inflation, job insecurity and new financial responsibilities are driving Gen Z to rein in spending, said Ali Furman, consumer markets industry leader at PwC. Many young adults are navigating major life transitions amid a tough job market for recent graduates, often without much savings. “It’s a coming of age story for this generation,” with some buying homes and starting families for the first time, forcing them to budget more carefully, Furman said.
Millennials and Gen Xers are keeping their holiday budgets roughly the same as last year, the survey found. Baby boomers are the only generation projecting an increase, with average spending up 5%.
Anzhelika Parenchuk, a 23-year-old first-year doctoral student at George Washington University, said she’s approaching the holidays with a tighter budget and turning more to discount retailers like Dollar Tree and Five Below for gifts.
“They have the same things as other retail stores, but cheaper,” she said.
Parenchuk said she learned her lesson after overspending last year. Now, without income from her former job since starting graduate school, she said she is stricter with her budget. Inflation has forced her to buy fewer things, and news about tariffs has her worried prices could climb even higher, she said.
Gen Z’s tighter holiday budgets are also driven by spending habits that prioritize splurging on experiences while seeking affordability elsewhere, curbing their appetite for lavish holiday shopping, PwC’s Furman said.
Gen Z is reluctant to cut back on concerts and events, even as ticket prices surge. A recent survey from the marketing agency Merge found that 86% of young adults admit to overspending on events. “Those experiences are taking up a lot more of their wallet share,” Furman said, “so they have less money to spend on holiday than they have in the past.”
Teens and young adults, shaped by an era of constant price increases, are drawn to value and embrace “dupe” culture, seeking cheaper alternatives to brand names, which allow them to stretch their budgets. Even for high-status items, Gen Z prefers them at a reasonable price, a concept that Furman called “affordable exclusivity.” She pointed to Labubus as a prime example of this phenomenon.
These value-oriented spending patterns reflect a larger trend across the economy. Retailers catering to budget-conscious consumers have been among the winners this past earnings season, with Dollar General, Five Below, TJ Maxx and Walmart reporting better than expected sales. On the other hand, companies that target middle- to higher-income shoppers, such as Target, have struggled.
A recent survey conducted by the digital coupon company RetailMeNot also found that shoppers plan to spend less this holiday season, with average budgets down 15%. Rising prices topped respondents’ concerns, and many said they would switch to different brands or start shopping earlier if tariffs drive costs higher. Shoppers are “spending with purpose, planning ahead, and saying yes to the right deals, just not all the deals,” said Stephanie Carls, retail insights expert at RetailMeNot.
The pressure on consumers could become even stronger in the coming months, which is probably bad news for someone like Parenchuk, who said rising prices have weighed on her shopping experience.
“It’s depressing,” she said, noting that what used to cost $10 now feels closer to $20, and she’s had to buy fewer items. She said she is trying to manage stress by setting stricter budgets.
“Get cash, and once you’re out, you’re out,” Parenchuk said, “just be more strict with myself for my own good.”
