Holiday Spending Is Back to Normal for Most—Besides Gen Z

two women sitting on a bench surrounded by shopping bags

As holiday shopping got underway this year, the U.S. was slowly shaking off the effects of the pandemic. Then came the omicron variant, complicating plans for seasonal shopping and family gatherings. As consumers juggled a return to normalcy with new concerns, financial strains associated with the holidays remained consistent across various age groups, but were especially felt by Generation Z.

Experian surveyed nearly 1,000 consumers in November to gauge their outlook on this holiday season and spending plans. Below we discuss the financial hurdles some groups faced during the holidays this year.

Budgeting Woes Troubled Almost Half of Gen Z Consumers Surveyed

Nearly 6 in 10 consumers who participated in our holiday survey said they felt strained by holiday shopping. Part of the strain came from making and sticking to a holiday budget, they indicated. One-third of consumers said they felt stressed about sticking to their budget, and 45% of adult Gen Zers (18- to 24-year-olds) experienced this stress in particular.

Generally, budgeting for holiday shopping is something that can get easier with increased income and better access to credit—two things that are still out of reach for many younger adults. To prepare for gift buying at the holidays, 80% of the young adults surveyed said they set money aside for gifts.

In fact, 39% of Gen Zers surveyed said running out of money prevented them from doing holiday shopping the way they'd planned. But they're not the only ones spending less: This year, consumers overall plan to spend less than last year. Falling from $775 to $753 per consumer on average, holiday spending is seeing a slight decrease despite a return to more typical celebrations in 2021.

The Effects of Barriers to Credit on 18- to 24-Year-Olds

The ongoing pandemic has continued to create financial barriers for some consumers, with 32% of consumers overall saying it has affected their holiday shopping plans—down 20% from last year. Gen Z, in particular, faces the double-edged sword of trying to establish a credit history during unusual financial times.

Members of Gen Z were twice as likely as other respondents to say they struggle with access to credit as a financial barrier this holiday season—20% for Gen Z versus 11% for consumers overall. With credit cards being almost as popular as debit cards to make purchases in 2021—credit's 47% popularity versus debit's 49%—this means some younger consumers are boxed out of a desirable payment method.

Lack of access to credit also means these younger consumers are also missing out on the secondary benefits of credit this season. Survey respondents noted the following secondary benefits when asked why they would open a new card during the holidays:

  • 48% said to maximize their spending with a card that provides cash back
  • 39% said to get the retail store discount
  • 33% said to maximize travel rewards
  • 31% said they need a 0% APR promotion on a new card

But with barriers in place for opening new lines of credit, younger adult consumers are missing out on the opportunity to get cash back, store discounts, travel rewards and 0% APR promotions, further eating into their potentially limited budget.

New Year, New Budget Plan for Many

Financial responsibility seems to be a priority for many in the new year. Of all consumers surveyed, 45% said they are engaging in end-of-year financial planning. Paying off debt before the new year is a top priority for 44% of respondents, while 41% plan to start the year off by not spending too much during the holidays.

This is a bit of a rebound for debt repayment plans after COVID-19, which sank to a priority for only 41% of survey participants in 2020. It is yet to reach levels seen in 2019, however, when 62% of respondents planned to work on their debt.

For some in Gen Z, facing down difficulty budgeting this year has provided inspiration to get their finances in better shape. Among the 18- to 24-year-olds surveyed, 79% said they wanted to improve their finances this holiday season. Almost half of Gen Zers surveyed want to create a budget for 2022 (45%) and improve their credit (46%). Meanwhile, 61% of this group also plans to save more overall in 2022, which will make budgeting for the holidays easier next year.

The majority of consumers overall are also looking to improve their credit score in 2022 by paying off debt, up 8% from last year when COVID-19 put a pause on repayments for many. The desire to improve credit has stayed steady year-over-year, hovering around this year's 31%. Improved credit may open doors to credit lines that were denied this holiday season.

Despite plans to improve credit in the new year, only 34% of those surveyed plan to pull their credit report. But getting a credit report is easy for anyone to do when they get their free credit report and FICO® Score from Experian. You can better prepare for next year's holiday spending when you start 2022 off right with important credit data in hand.