Why Gen Z is breaking the mold on holiday spending by choosing to save

A Generation Rewriting Holiday Spending Rules

As the holiday season approaches in 2025, a noticeable shift is occurring. Younger shoppers, particularly those from Generation Z, are not following the traditional pattern of gift giving extravagance, excessive shopping sprees, and last minute splurges. Instead, they are leaning toward savings, practicality, and value driven spending.

According to a recent report, many Gen Z consumers plan to cut holiday spending, favor second hand goods, and allocate more of their budget to essentials rather than non essential indulgences.

This emerging behavior not only reflects larger economic pressures but also signals a deeper generational shift in attitudes toward consumption, value and financial responsibility.

In this article, we explore why Gen Z is breaking the mold on holiday spending, what is driving the change, how it is playing out in real behavior, and what it means for retailers, other generations, and future spending seasons.

What the Data Says: Gen Z Is Spending Less in 2025

Sharp Reduction in Holiday Budgets

Survey data from 2025 paints a clear picture. Gen Z is preparing to scale back. According to recent findings, Gen Z respondents plan to cut their holiday spending by an average of 23 percent compared with last year, marking the largest drop among all generations.

Even though the average planned holiday spending for Gen Z remains significant at around 1,357 USD, it represents a meaningful retreat from previous expectations.

Overall United States holiday spending is also expected to drop by roughly 5 percent this year as consumers adapt to evolving economic conditions.

Prioritizing Essentials and Practical Items

Instead of high ticket gifts or indulgent purchases, many Gen Z shoppers say they intend to focus on necessities or practical gifts. Spending on apparel, electronics, accessories, and luxury goods is likely to shrink, while essentials such as groceries, everyday items, and affordable gifts take priority.

Many Gen Z consumers are also embracing second hand purchases, upcycled goods, or dupes as part of their holiday shopping strategy.

The emphasis is shifting from the mindset of more expensive equals better to smart, value driven choices.

Savings Over Spending: A Frugal, Conscious Mindset

The economic backdrop, influenced by inflation, tariff pressure, uncertain job markets, and slowing income growth, plays a significant role in this change. For many Gen Z individuals, the economic pressures of 2025 have made them more cautious, prompting them to rely more on savings and less on impulse purchases.

This shift aligns with broader research showing Gen Z increasingly values savings, budget planning, and long term financial goals over instant gratification.

Why the Shift: What Is Driving Gen Z Spending Habits

Economic Pressure and Financial Reality

Several key factors are reshaping Gen Z financial behavior:

Inflation and rising cost of living reduce disposable income and shrink budgets for gifts and luxury spending.

Entry level wages, uncertain labor markets, and student debt burdens prompt young adults to prioritize financial stability over holiday splurges.

Rising tariffs and global economic uncertainties increase prices on consumer goods, leading Gen Z to seek value and affordability.

As a result, Gen Z appears to conclude that holiday cheer does not require lavish spending. Saving money or spending intentionally feels more strategic.

Changing Values: From Materialism to Sustainability and Conscious Spending

Gen Z attitudes toward consumption differ notably from previous generations. Their choices reflect practicality, sustainability, and authenticity over brand prestige or material excess.

Many prefer buying second hand, upcycled, or discounted items rather than paying full price for branded goods.

They also prioritize gifts with practical value rather than flashy luxury items.

Experiences such as travel or personal growth may be increasingly favored over material gifts. A lifestyle trend called soft saving encourages saving money while allowing flexibility for enjoyable experiences.

This shift marks a broader cultural transformation in how value is defined.

Budgeting, Financial Literacy and Smart Planning

Growing financial literacy also fuels Gen Z behavioral change. Surveys show many Gen Zers actively budget, track expenses, and plan for the future, even during holiday seasons.

They tend to wait for sales or discounts before making purchases.

They use alternative shopping options like resale markets and upcycled goods.

They allocate gifts and holiday spending based on clear budgets rather than impulsive decisions. Many even use digital tools or AI powered budgeting apps to manage spending.

This financial mindfulness suggests that Gen Z’s shift may be a foundational rethinking of spending habits.

What This Means for Retailers, Markets and Holiday 2025

Retail Landscape: Demand May Shift Significantly

Given that Gen Z makes up a substantial portion of holiday shoppers, their evolving spending behaviors could reshape retail demand for 2025 and beyond.

Possible outcomes include:

Reduced demand for new full price items as Gen Z trades down or waits for sales.

Increased demand for second hand, refurbished, or budget friendly items.

Retailers may face pressure to promote value, affordability, discounts, bundles, and essential goods rather than exclusivity.

Retailers relying heavily on premium holiday revenue may need to rethink inventory, pricing, and promotional strategies.

Market Trends: A Reflection of Broader Consumer Behavior

Gen Z cautious spending may contribute to a modest overall slowdown in retail activity this holiday season, aligning with forecasts of a decline in average spending across generations.

Demand may shift toward essentials, practical gifts, resale, sustainability focused products, and value oriented options.

As Gen Z gains more spending power in future years, brands may need to adapt to a world where consumers prioritize value and consciousness over luxury.

Potential Risks, Tradeoffs and What Is Lost or Gained

What Might Be Lost

Less festive splurge culture as expensive gifts and extravagant decorations decline.

Pressure on industries reliant on discretionary spending, such as fashion and electronics.

A potential long term slowdown in consumption that could impact economic growth, hiring, and seasonal promotions.

What Could Be Gained

Better financial resilience among younger consumers who save more and spend intentionally.

Reduced waste and improved sustainability thanks to second hand and upcycled consumption.

More meaningful and practical gift giving with focus on utility and experiences.

A retail landscape that adapts with better deals and value for consumers.

What This Says About Gen Z and Broader Generational Change

Gen Z’s behavior signals deeper shifts beyond economic caution.

From Status to Substance

Gen Z redefines value, favoring utility, sustainability, and long term benefit over luxury or status symbols.

They lean toward authenticity and purpose, whether buying budget friendly gifts, shopping second hand, or gifting experiences.

Financial Awareness and Mindful Consumption

This generation is known for budgeting, tracking expenses, and sharing saving strategies publicly. Financial mindfulness is becoming a norm, challenging stereotypes of impulsive youth spending.

A Cultural Shift That May Outlast Economic Conditions

Even if economic pressures ease, Gen Z may not return to old habits. Value, sustainability, and budgeting could remain long term cultural norms.

What to Watch During and After the Holidays

Key indicators of long term change include:

Sales data for second hand and discount retailers.

Trends in experiential versus material gifts.

Average spending per Gen Z household.

Shifts in brand loyalty based on value consciousness.

Consumer sentiment in early 2026.

A Generation Redefining Holiday Spending

Gen Z sends a clear message this holiday season. They want to spend smarter, not more. Their focus on savings, value and financial awareness reflects a significant transformation in holiday culture.

Retailers and brands must recognize that the holiday shopper of 2025 is value conscious, practical, and intentional. Those who adapt will thrive. Those who hold onto outdated assumptions may be left behind.

For Gen Z, this shift may represent a new cultural norm. Holiday spending is becoming less about indulgence or impression, and more about responsibility, meaning, and long term thinking.