Millennials are expected to lead the surge in holiday spending this year, with many planning to increase their budgets compared to last year.
According to a report by TransUnion, 63% of millennials, who are now parents with school-age children, indicated they would spend the same or more on gifts this year, the highest percentage among all generations surveyed. This optimism is fueled by recent wage increases and the anticipation of further earnings growth in the coming year.
Despite a slight increase in the unemployment rate, the employment landscape remains stable, contributing to consumer confidence.
The National Retail Federation has projected record holiday spending between November 1 and December 31, estimating a total of $979.5 billion to $989 billion. Deloitte's holiday retail survey found that holiday shoppers expect to spend an average of $1,778, an 8% increase from the previous year.
Despite rising credit card debt, consumers are still willing to invest in holiday gifts. A significant portion of holiday shoppers is still dealing with the financial aftermath of last year's spending, with 28% of surveyed consumers not yet having paid off their previous holiday purchases. The reliance on credit cards remains prevalent, with 74% of shoppers planning to use them for their holiday expenditures. Additionally, 28% of consumers intend to dip into their savings, while 16% are considering buy now, pay later services.
The buy now, pay later (BNPL) model is one of the fastest-growing segments in consumer finance, with expectations of reaching a record single-day spending of $993 million on Cyber Monday. While BNPL can be advantageous when used responsibly, accumulating multiple BNPL accounts with varying payment dates can complicate financial management and lead to a cycle of debt. Having multiple BNPL accounts can increase the risk of overspending, missed payments, and a deteriorating credit history. As the popularity of BNPL services grows, it is important for consumers to exercise financial literacy and careful planning to avoid falling into debt traps.