Why Younger Shoppers Are Tightening Their Belts This Holiday Season

The 2025 holiday shopping landscape is shaping up very differently than expected. Recent market research reveals a striking trend: American consumers are planning their most frugal holiday spending in years, with younger demographics leading the pullback.

According to PwC’s latest consumer outlook study conducted in late June, overall U.S. holiday spending is anticipated to decline by 5% compared to previous years – marking the first time since 2020 that consumers expect to reduce seasonal expenditures. More striking still, 84% of respondents signaled intentions to cut their spending over the coming six months. But the generational breakdown tells an even more dramatic story.

The Gen Z Spending Collapse

Gen Z shoppers (ages 17 to 28) are exhibiting the most pronounced frugal tendencies of any age group, planning to slash their holiday budgets by 23%. This represents a stunning reversal from 2024, when this same demographic had vowed to increase spending by 37%. The shift signals meaningful economic strain among younger adults now entering their peak consumer years.

Data from PwC’s 4,000-person study (conducted June 26 – July 9) indicates that 25% of Gen Z respondents report their financial situation has deteriorated over the past year, double the 12% rate from the previous survey period. For context, only 17% of Gen Z respondents had reported financial decline in 2024’s research.

Despite their pullback, Gen Z still plans to allocate roughly $1,357 for holiday expenses – placing them third among generations but well below older cohorts. Millennials lead projected spending at $2,190 per person, followed by Gen X ($1,483) and baby boomers ($1,180).

Understanding Gen Z’s Economic Reality

According to Ali Furman, PwC’s Consumer Market Industry Leader, Gen Z’s frugal approach reflects a generational inflection point. “They’re coming of age,” Furman explained. With average Gen Z age now at 22 (ranging up to 29), this demographic is simultaneously navigating major life transitions: starting families, assuming mortgage obligations, and learning fundamental budgeting discipline.

Yet financial pressure alone doesn’t explain the spending shift. Furman pointed to another critical factor: “Retailers aren’t meeting their needs and expectations.” Gen Z has been shaped by perpetually rising costs, making them hyper-sensitive to value and price transparency in ways older generations simply aren’t.

Price Sensitivity as a Core Identity

“Price is Gen Z’s love language,” Furman stated bluntly. Raised during an era of economic volatility and continuous social media exposure, this generation expects lightning-fast trend velocity and absolute cost clarity. They’ve grown accustomed to rapidly adopting and abandoning trends through their “always-on feed,” and they demand retailers match that same speed.

Interestingly, Gen Z is simultaneously driving increased foot traffic to physical retail locations and malls – they value in-person experiences and tangible product interaction. However, this store visitation isn’t translating to proportional sales. “They’re walking through doors but not buying,” Furman noted. “That represents a real opportunity for retailers willing to innovate.”

She suggested retailers could capture Gen Z conversion by transforming stores into experiential destinations: limited-edition product drops, treasure hunt promotions, influencer collaborations, and carefully balanced combinations of uniqueness and affordability.

How Shopping Patterns Are Evolving

The research reveals broader shifts in holiday purchasing behavior across all demographics. Consumers now plan to complete 80% of their shopping by Cyber Monday, suggesting an earlier-than-typical purchasing window. This reflects both the economic uncertainty prompting deliberate spending decisions and logistical preferences for early completion.

Channel preferences are reaching near-parity for the first time: 51% of consumers plan online purchases through marketplaces like Amazon, eBay, and Etsy, while 53% prefer in-store shopping. Among those choosing physical retail, 48% cite desire to interact with products directly, 38% are drawn by promotional offers, and 25% value the holiday shopping atmosphere.

Gift Strategy Shifts Toward Practicality

Gift card purchases are emerging as the top gift category, with consumers viewing them as a strategic tool to navigate rising costs while maintaining an appearance of generosity. As PwC’s research notes, “A $100 gift card still signals generosity, even if it purchases less than a year ago.”

Beyond gift cards and toys – traditional top categories – gift-giving preferences are shifting toward consumable goods and food products. Food is proving particularly resilient this holiday season, the data shows. Unlike apparel or electronics that add household clutter, food-based gifts deliver affordability, perceived generosity, and personal thoughtfulness simultaneously.

Approximately 15% of younger consumers (Gen Z and millennials) indicated they’ll use AI tools to generate gift suggestions, reflecting broader adoption of technology in purchasing decisions.

What’s Ahead

The PwC research includes an important caveat: these spending projections assume relatively stable economic conditions. Should tariff policies or broader economic circumstances shift significantly, consumer behavior could adjust accordingly. For now, however, the picture is clear: this will be a frugal holiday season, with younger shoppers leading the charge toward more disciplined, value-conscious purchasing patterns.