Americans to increase holiday spending to $2,800 despite mounting financial pressures

Inflation will play a key role in spending decisions this holiday season, with costs set to rise by almost a thousand dollars compared to last year.

Americans are preparing to shell out close to $2,800, a jump of almost 60% from 2024, according to new findings from BMO Financial Group’s BMO Real Financial Progress Index, which puts the rise down to both pent-up demand and the strain of higher prices.

Consumers are under pressure from inflation with 62% of respondents saying that their worries about the cost of living have intensified over the past three months and even smaller holiday expenses are creeping up, with miscellaneous spending rising to around $220 from $140 a year ago.

Millennials expect to outspend every other group by a wide margin, budgeting more than $4,400, while Gen X will spend a more restrained $2,500, Gen Z anticipates a little above $2,200, and Baby Boomers estimate just over $1,600.

“The holidays this year come on the heels of a period defined by inflation and price volatility for everyday items, leaving many consumers confused and stressed as they plan for year-end festivities,”

Says Paul Dilda, head of US Consumer Strategy at BMO, who cautioned that financial stress is shaping how many Americans approach the season. “This is why it’s important to create a realistic spending plan to have the holiday season you want without impeding your real financial progress.”

While inflation remains a key theme of concern, 57% of poll participants say they’re increasingly uneasy about import tariffs, and nearly two thirds report changing how they shop because of unpredictable pricing. More than half say holiday planning stresses them out, and stress is even higher among parents with young children.

Budget holiday season

In response, shoppers are leaning heavily on budgeting with 70% working harder to stay within a holiday spending plan, and 45% cutting back on non-holiday gifts to make room in their budgets. Cash remains the preferred payment method for just under a third of consumers, though younger shoppers are slightly more likely than Boomers to use it.

Four in ten plan to hunt for sale or clearance items, over a third will choose more affordable gifts, and a third intend to switch to budget friendly brands. Nearly a quarter will simply reduce the number of presents they purchase.

Among those adjusting their shopping because of tariffs, nearly half will look for gifts that are less likely to be affected, and nearly half say they will shop earlier in the year. More than a third are setting aside money specifically to cover potential tariff-related increases.

Even with the overall surge in holiday expenditures, consumers are pulling back in some areas.

Spending on groceries is expected to run around $590, while travel budgets have dipped to about $490. Only 40% plan to travel (down from 45% last year) and one in five has delayed or cancelled travel plans because of cost concerns.

Gift spending remains the biggest category. Clothing leads at roughly $250, followed by electronics at $220 and toys and games at about $120. Americans also plan to spend on dining out, entertaining, alcohol, and holiday décor, though many of these categories show only modest increases. Charitable giving is expected to average $250, slightly below last year, even as more people say they plan to donate.

BMO’s index, created in 2021, tracks how Americans perceive their financial momentum. This year’s survey reflects responses from 2,500 adults between September 3 and October 11, 2025, with a margin of error of plus or minus 2.4 percentage points.