One-third of Americans enter the holiday season in the red

• 21% of Americans don't care about making good financial decisions during the holidays, which is the case for 37% of Gen Z and 30% of millennials.
• One-third of consumers (33%) will head into the holiday season with more than $5K in debt.
• Nearly half of Americans (49%) feel the most stressed about their finances during the holiday season.

The verdict is typically split regarding how people feel during the holiday season. For many, it's a joyful time with family and friends, but for others, it can feel overwhelming, especially when it comes to money and finances.

According to a new study conducted by Qualtrics on behalf of Intuit Credit Karma, nearly half of Americans (49%) feel stressed about affording the holidays this year. While the holidays are generally an expensive time, 61% of consumers say that inflation and higher costs have significantly impacted their holiday spending budgets. Yet, interestingly, the latest rate cut from the Fed has Americans feeling more comfortable swiping their credit cards as a quarter (25%) say they will spend more on holiday shopping now that interest rates have dropped (45% of Gen Z, 39% of millennials). Regardless, 44% of people feel pressure to spend more than they can afford this holiday season, climbing to 53% of Gen Z and millennials.

Some people are so stressed that they wish the holidays were canceled this year because of the cost (29%), which is especially the case for young people (38% of Gen Z and 37% of millennials). These uneasy feelings could stem from the debt hanging over Americans' heads as they enter an already pricey time of the year. In fact, 43% of consumers have existing debt heading into this holiday season, and a whopping one-third (33%) are carrying upwards of $5,000 in debt. It's no wonder that nearly half of consumers (49%) feel the most stressed about their finances during the holiday season.

The season of YOLO spending

Tis the season of targeted ads and savvy sales tactics making it all too easy to get carried away when holiday shopping. More than a quarter of consumers (27%) say social media drives them to overspend during the holidays - which is especially the case for Gen Z (46%) and millennials (37%) - and 40% say that holiday sales encourage them to spend money they don't have on things they don't need. A prime instance of that is the act of "spaving": spending more to save more, i.e. adding an extra item to an online shopping cart to get free shipping. In fact, 40% of Americans say they are more likely to "spave" while holiday shopping, jumping to 49% of Gen Z and 51% of millennials.

Not only do consumers feel obligated to buy gifts for other people, but they're also subject to temptation to buy for themselves. More than one-third of consumers (37%) say they typically spend money on themselves when holiday shopping for others, especially Gen Z and millennials (47%).

Some people have given up on trying to be fiscally responsible during the holiday season. In fact one-in-five Americans (21%) say they don't care about making good financial decisions during the holidays, especially young people (37% of Gen Z and 30% of millennials). This is validated by the fact that during the holiday season, some consumers don't budget (26%), don't keep track of their spending (20%) and spend what they want, and deal with the consequences later (25%).

Savvy shoppers practice mindful spending

The rules of responsible spending go out the window for many consumers during the holiday season, yet others have a system in place to make sure they don't stretch their wallets too thin. An impressive 28% of people claim they make a budget during the holiday season and always stick to it. In other instances, it's all about preparation - 44% of Americans say they save money throughout the year in preparation for holiday spending, while roughly one-third (32%) say they shop throughout the year so they don't spend all at once. And, some go as far to buy gifts on sale/clearance right after the holidays come to a close for next year (19%). Money reasons aside, 58% of consumers are being cautious of overconsumption this holiday season.

Gifts and groceries drive up balances and deplete savings

Of the 49% of Americans who plan to take on debt this holiday season, they point to gifts for others (61%), groceries for holiday meals (44%) and necessities like rent and bills (29%) as primary items they'll go into debt for.

Those who plan to spend money this holiday season will pay with cash (49%), charge their credit cards (42%), pull from their savings (26%); (34% of Gen Z), use credit card rewards (25%) and pull from a dedicated savings account for holiday spending (14%). And, nearly one-in-six consumers (16%) plan to open a new credit card, whether it be a rewards card or retail card, specifically for holiday shopping, which is the case for 30% of Gen Z and 27% of millennials.

Sacrifices and compromises will be made

More than a quarter of Americans (27%) will have to skip holiday traditions this year due to cost, climbing to 35% of Gen Z and 36% of millennials. Of those, more than half (53%) say this is the first year they've had to skip a holiday tradition because of money. In an effort to save money on the holidays, nearly one-third of consumers (30%) plan to shop at discount stores, while others plan to make DIY gifts (e.g. baked goods, knitting, art) (20%), have honest conversations with friends and family about what they can afford (19%), coordinate a git exchange that only requires each person to buy one gift (17%), skip exchanging gifts (16%) and shopping second-hand (15%).

Parents with young children may face challenging conversations around gifting expectations as a quarter of parents (25%) with kids under 18 say they are not giving gifts to their kids this season due to their financial situation. Yet, some are less willing to broach the topic with more than half of parents (55%) saying they'd rather take on debt to buy gifts for their children than tell them they can't afford them. Others will also take the opportunity to have honest conversations with their kids about money - 56% of parents will set financial boundaries with their kids around gift giving and 51% will use the holidays as an opportunity to teach their kids about money.

Student loan borrowers face affordability challenges

Student loan borrowers face an especially challenging holiday season with 46% of borrowers saying they cannot afford the holidays this year because of their student loan payments, while another 45% cannot afford to travel home. Some borrowers will prioritize the holidays over their finances with 47% saying they will pause making payments toward their student loans so they can enjoy the holidays.

"Time and time again, the holidays are a polarizing time of the year for people, bringing forth a range of emotions from excitement and community to anxiety and loneliness," said Courtney Alev, consumer financial advocate at Intuit Credit Karma. "Oftentimes, these feelings of unrest stem from money worries - our study found that more than a third of Americans (37%) say the cost of the holidays negatively impacts their mental health. For those who are stressing about the cost of the holidays this year, you're not alone. Talk to your family and friends about what you can and cannot afford, or consider setting up a gift exchange that only requires each participant to give just one gift. And remember, the true purpose of the holiday season is to spend time with your loved ones, not to exchange gifts."

Methodology

This survey was conducted online within the United States by Qualtrics on behalf of Intuit Credit Karma between September 20, 2024 and September 29, 2024 among 2,003 adults ages 18 and older.

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