Holiday Spending Forecast: Younger Generations Brace for Austerity as Debt Rises
WASHINGTON – As the holiday season approaches, a new analysis of consumer financial health paints a concerning picture for younger Americans, suggesting a significant pullback in spending compared to previous years. While overall holiday shopping hit record levels in 2024, data from Equifax indicates a growing financial strain, particularly among Millennials and Generation Z, raising questions about whether this year will maintain that momentum.
The Equifax Market Pulse Index, a key indicator based on credit reports, debt-to-income ratios, and broader economic trends, currently stands at 61.4. This represents a 0.6 point decline since 2021, a trend largely driven by the deteriorating financial situations of younger demographics. Millennials have seen a 1.1 point drop in their score over the past four years, while Gen Z has experienced a more dramatic decrease of 3.3 points.
These numbers translate directly into spending forecasts. Surveys predict Millennials will reduce their holiday spending by 1%, while Gen Z is expected to cut back by a substantial 23%.
“We’re seeing a clear divergence in financial well-being,” explains Dr. Emily Carter, a financial economist at the Brookings Institution. “Older generations generally have more established savings and assets, providing a buffer against economic headwinds. Younger generations are grappling with student loan debt, stagnant wages, and a lack of affordable housing, leaving them with less disposable income.”
A significant factor contributing to this disparity is the limited financial safety net available to younger families. Since April 2019, severe delinquencies have risen among young city families by as much as 10%, and among young singles. This is particularly striking considering Gen Z holds 5% of US savings but only 3% of invested assets, while Millennials control 23% of savings. Both generations are experiencing a decline in their ability to save and invest.
The situation is further complicated by a growing reliance on credit. Over 19 million Gen Z consumers have opened new credit accounts since 2021, signaling a struggle to manage expenses. A small, but significant, segment of Gen Z – 5% – controls a disproportionate 63% of the generation’s wealth, highlighting the widening gap within the demographic.
To navigate these financial constraints, consumers are shifting their strategies. Early holiday shopping is on the rise, with an estimated 39% of gift purchases expected to occur between Thanksgiving and Cyber Monday, slightly down from 45% in 2024, but still representing a substantial portion of overall spending. Around 80% of planned gift spending is anticipated to be completed by the end of Cyber Monday.
“Consumers are frontloading their purchases to spread out the cost and take advantage of early deals,” says Sarah Miller, a retail analyst at Deloitte. “This is a clear indication of budget consciousness.”
The increasing popularity of “Buy Now, Pay Later” (BNPL) services is another key trend. Two-thirds of parents report they would use BNPL for larger purchases like vehicles or electronics, but also for smaller items like clothing and accessories. BNPL is now influencing purchasing decisions for 43% of consumers, impacting where they choose to shop.
Despite the financial pressures, certain holiday spending habits remain resilient. Gifts for family, children, and those tied to tradition are considered non-negotiable, leading many consumers to cut back on essential expenses like groceries – an estimated 82% – to allocate funds to the holiday season.
Financial advisors are urging consumers to proactively manage their finances. Companies like Equifax offer advisory services to help individuals assess their financial health and develop strategies for wealth preservation and growth.
“For younger generations, in particular, seeking professional financial guidance is crucial,” says Mark Johnson, a certified financial planner. “Navigating debt, building savings, and making informed investment decisions can make a significant difference in long-term financial stability.”
Image of Equifax 2025 Holiday Spend Trends Infographic
Source: Equifax
