The holiday season is a time of joy, family gatherings, and gift-giving, but for many, it’s also becoming a season of financial stress. If you’ve noticed your holiday expenses creeping up year after year, you’re not alone. From rising travel costs to inflated gift prices, the cost of celebrating seems to climb relentlessly. In this article, we’ll dive deep into why holidays are getting more expensive in 2025, explore the economic and social factors at play, and offer practical tips to keep your holiday budget in check. As someone who’s juggled holiday planning on a tight budget, I’ll share insights and real-world examples to help you navigate this pricey season with confidence.
The Economic Forces Driving Up Holiday Costs
Inflation: The Silent Budget Buster
Inflation has been a buzzword in recent years, and it’s hitting holiday budgets hard. In 2024, 59% of consumers reported that inflation influenced their holiday spending, with the average shopper planning to spend $1,638, a 7% increase from 2023. This rise isn’t just about wanting to buy fancier gifts—it’s because the cost of goods and services, from wrapping paper to airline tickets, is climbing. Inflation erodes purchasing power, meaning your dollar buys less tinsel and turkey than it did a few years ago.
Supply Chain Woes and Retail Challenges
Global supply chain disruptions, lingering from the pandemic and exacerbated by geopolitical tensions, are another culprit. Shipping delays, labor shortages, and increased fuel costs drive up the price of everything from toys to holiday hams. Retailers, facing higher operational costs, pass these expenses on to consumers. For example, the cost of imported holiday decorations has risen due to higher freight charges, making your Christmas tree lights a bit pricier.
Rising Travel Costs
Travel is a major holiday expense, and it’s not getting cheaper. Airfares are projected to rise by 3% in 2025, with the average cost of a holiday abroad reaching £1,312 for a 9-night trip. Hotel rates and gas prices are also climbing, with 61% of travelers citing increasing travel expenses as a top concern. For families like mine, who travel cross-country to visit relatives, these costs can turn a simple holiday getaway into a financial hurdle.
Consumer Behavior and Spending Trends
The Pressure to Splurge
Holiday spending isn’t just about economics—it’s also about emotions. The pressure to create magical moments often leads to overspending. In 2024, 26% of consumers planned to spend significantly more, averaging $3,076, while those cutting back expected to spend just $776. This divide reflects a growing trend: wealthier and younger consumers, particularly Gen Z and millennials, are splurging, while others tighten their belts. I remember last Christmas when I felt the urge to buy my niece the latest gaming console, only to realize it cost more than my monthly grocery bill
The Rise of “Doom Spending”
A new phenomenon called “doom spending” is emerging, especially among younger generations. Financial stress leads some to make impulsive purchases as a coping mechanism. In a 2025 survey, 29% of Gen Z and 24% of millennials reported increasing non-essential spending despite economic concerns. This behavior can inflate holiday budgets, as shoppers chase deals or buy trendy gifts to feel a fleeting sense of control.
Online Shopping and AI Influence
The shift to online shopping is another factor. In 2024, online holiday sales reached $241 billion, an 8.4% increase from 2023. Cyber Monday alone saw $13.3 billion in sales. Retailers leverage AI to personalize offers, tempting shoppers with targeted ads. While convenient, this can lead to overspending, especially when 17% of consumers use tools like ChatGPT to discover products. My sister once fell for an AI-recommended “perfect gift” that was way over budget—sound familiar?
The Role of Retail Strategies
Early Sales and Shorter Shopping Seasons
Retailers are starting holiday sales earlier, with 45% of shoppers browsing before November to spread out budgets and snag deals. However, a shorter shopping window—five fewer days between Thanksgiving and Christmas in 2024—put pressure on retailers to offer deep discounts early, which can inflate perceived value and encourage overspending. Last year, I got sucked into a Black Friday sale in October, only to realize I’d spent half my holiday budget before Halloween.
The Allure of Discounts and BNPL
Discounts are a double-edged sword. While 68% of consumers are motivated by deep discounts, these deals often lead to impulse buys. Buy Now, Pay Later (BNPL) schemes, which surged by 47% on Black Friday 2023, also make overspending easier. BNPL loans accounted for 21% of holiday debt in 2024, with some consumers still paying off balances from the previous year. These options can make holiday shopping feel affordable upfront but costly in the long run.
Breakdown of Holiday Expenses
To understand why holidays feel pricier, let’s break down the key expense categories:
| Category | Average Cost (2024) | Projected Increase (2025) | Key Drivers |
|---|---|---|---|
| Gifts | $677 | 3–5% | Inflation, demand for tech gadgets |
| Travel (Flights/Hotel) | $2,330 | 3–4% | Rising airfares, fuel costs |
| Food & Drink | $265 (Thanksgiving) | 5–7% | Higher grocery prices, hosting |
| Decorations | $100–$200 | 4–6% | Supply chain costs, import tariffs |
Pros of Increased Spending:
- Supports retailers and local economies.
- Allows for more memorable holiday experiences.
- Encourages early shopping, reducing last-minute stress.
Cons of Increased Spending:
- Risk of holiday debt, with 28% of 2024 shoppers still paying off credit card balances.
- Financial stress, reported by 55% of holiday shoppers.
- Impulse purchases that don’t align with long-term goals.
Generational Differences in Holiday Spending
Gen Z: The Big Spenders
Gen Z is leading the charge in holiday spending, planning to spend $1,275 in 2025, a 15% increase from 2022. They’re drawn to mobile shopping and in-store events, with 60% attending holiday retail events in 2024. Their love for tech-driven experiences, like contactless check-ins and AI-curated gift lists, fuels higher spending.
Millennials: Balancing Splurge and Stress
Millennials, in their peak earning years, are also spending more, with 24% increasing non-essential purchases. They prioritize convenience, with 73% likely to self-gift during holiday shopping. However, they’re also stressed about costs, with 67% citing economic concerns.
Gen X and Boomers: Cutting Back
Gen X (20%) and baby boomers (17%) are more likely to reduce spending, focusing on cost-effective options like staying with family over hotels. Boomers, in particular, prefer traditional in-store shopping and are less swayed by online deals, which helps them stick to budgets.
People Also Ask (PAA)
Why are holiday prices increasing in 2025?
Holiday prices are rising due to inflation, supply chain disruptions, and higher travel costs. Consumers are also spending more on experiences and tech-driven gifts, while retailers pass on increased operational costs.
How much will the average American spend on holidays in 2025?
The average American is projected to spend around $1,778 in 2025, up 8% from 2024, covering gifts, travel, and celebrations.
How can I save money during the holiday season?
Shop early, set a strict budget, use cashback rewards, and consider homemade gifts or group activities to cut costs without sacrificing joy.
Are there ways to travel cheaper during the holidays?
Yes, book flights early, use rewards points, opt for budget accommodations like staying with family, or choose destinations with lower costs.
Practical Tips to Manage Holiday Expenses
Create a Realistic Budget
Start by estimating your total holiday spending, including gifts, travel, and food. In 2024, 27% of shoppers set a strict budget, which helped them avoid overspending. Apps like Rocket Money can track your holiday budget and alert you to overspending. Last year, I set a $500 gift budget and stuck to it by shopping sales and using cashback apps.
Shop Smart with Technology
Use price comparison tools like Honey or CamelCamelCamel to find the best deals. Mobile apps offering exclusive discounts are popular, with 44% of shoppers citing them as a reason for mobile purchases. Be wary of AI-driven ads that push you to buy more than you need.
Explore Cost-Effective Travel Options
Consider driving instead of flying, as 28% of holiday travelers did in 2024 to save money. Staying with friends or family, chosen by 56% of travelers, can also cut accommodation costs. Websites like Kayak or Skyscanner can help you find cheaper flights if booked early.
Embrace Thoughtful, Low-Cost Gifts
Homemade gifts or experiences, like a family game night, can be just as meaningful as expensive presents. In 2024, 70% of consumers engaged in charitable activities, showing that giving doesn’t always mean spending big. I once baked cookies for my coworkers, and they loved the personal touch more than store-bought gifts.
Comparison: 2024 vs. 2025 Holiday Spending
| Factor | 2024 | 2025 (Projected) |
|---|---|---|
| Average Spending | $1,638 | $1,778 |
| Online Sales Growth | 8.4% | 7–9% |
| Travel Costs (Flights) | $2,330 | $2,400–$2,500 |
| Inflation Impact | 59% of shoppers affected | 60–65% expected to be affected |
| Debt from Holidays | 28% still paying off 2023 debt | Similar or slightly higher |
FAQ Section
How can I avoid holiday debt in 2025?
Set a budget early, avoid BNPL schemes unless you can pay them off quickly, and use rewards credit cards strategically, paying balances in full to avoid interest.
Why is travel so expensive during the holidays?
Peak demand, rising fuel costs, and limited flight availability drive up prices. Booking early or choosing off-peak travel dates can help.
Are gift cards a good way to save money?
Gift cards are popular (44% of shoppers buy them) and can help you stick to a budget, but ensure they’re from reputable retailers to avoid scams.
What are the best tools for holiday budgeting?
Apps like Rocket Money, YNAB, or Mint can track spending. Browser extensions like Honey or Rakuten offer cashback on purchases.
How early should I start holiday shopping?
Start in October to spread costs and snag early deals, as 45% of shoppers did in 2024. This also reduces stress from last-minute rushes.
The Emotional Side of Holiday Spending
The holidays aren’t just about dollars and cents—they’re about creating memories. But the pressure to overspend can steal the joy from the season. I remember one Christmas when I maxed out my credit card to buy gifts, only to spend the next six months paying it off. The stress wasn’t worth it. In 2025, focus on what truly matters: time with loved ones. A homemade meal or a heartfelt card can mean more than an expensive gadget.
Looking Ahead: A Smarter Holiday Season
As we head into 2025, holiday costs are likely to keep rising, driven by inflation, supply chain challenges, and consumer trends. But with smart planning, you can celebrate without breaking the bank. Set a budget, shop early, and prioritize experiences over material gifts. By understanding the forces behind rising costs and using practical strategies, you can make the holidays merry and financially manageable.
For more budgeting tips, check out Rocket Money or explore NRF’s Holiday Spending Insights for the latest trends.
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