- More than 30% of respondents feel financially unprepared for the upcoming holiday season.
- 43% feel more financially stressed this holiday season compared to previous seasons, citing inflation as the leading cause of financial stress.
- Three-fourths of respondents plan to spend the same amount or less this holiday season compared to last
- Yet, 23% of respondents expect that they will go into debt to pay for gifts this holiday season
Prior to the pandemic, the most wonderful time of year was marked by festive decorations, endless sugar cookies and some of the ugliest sweaters you’ve ever seen. More than that, it served as an opportunity for families, friends and loved ones to step away from their busy lives and celebrate the holidays together. However, the pandemic changed many of those traditions, especially last year when stay-at-home orders were largely still in place and many Americans were still unemployed or furloughed from their jobs.
Fast forward to today — many Americans are hoping to make up for lost time by going all out this holiday season. The question is, are they financially prepared to do so?
According to a study by Qualtrics on behalf of Credit Karma, 32% of respondents feel financially unprepared for the upcoming holiday season. Of those, more than a quarter say the primary reason for feeling financially unprepared is because they’re living paycheck to paycheck with another 20% reporting they are currently unemployed.
This trend is reflected in how consumers feel about their finances overall. According to the study, one-third of respondents do not feel financially stable right now. The top factors driving this feeling of financial instability include not having money saved (62%), not having an emergency fund (47%) and not having money to pay bills (37%). This is likely the result of consumers’ finances taking a hit during the pandemic, considering 37% of all respondents said their financial situation has worsened since the beginning of the pandemic.
Retailers beware: Financial instability could mean less holiday shopping
The majority of respondents (76%) plan to spend the same amount or less this holiday season compared to last with 41% planning to spend less. Nearly half (46%) of those who plan to spend less this season say it’s because their financial situation worsened due to COVID and 31% said they are prioritizing saving over spending this year.
It’s worth noting, however, there’s a clear division between those who are financially stable and those who are not. For example, 50% of those who plan to spend less this year but who feel financially stable say they’re prioritizing saving over spending, compared to 22% of those who do not feel financially stable. Here’s a look at how this plays out for both groups:
Which of the following reasons best describes why you’ll be spending less this holiday season compared to the last? Please select all that apply.
|Financially Stable||Financially unstable|
|My financial situation has worsened due to COVID-19||23%||58%|
|I’m prioritizing saving over spending this year||50%||22%|
|I don’t plan to travel this holiday season||22%||23%|
|The pandemic made me realize I don’t need to spend money on the holidays||22%||13%|
|I will spend less money on experiences (e.g., concerts, sporting events, etc.) given they’re limited||18%||15%|
|I spent too much money this summer, which set me back financially||7%||11%|
Less financial stability, more financial stress
This feeling of financial instability could be leading to elevated stress levels for consumers heading into the holiday season. According to the study, 43% of respondents feel more financially stressed this holiday season compared to previous years. The rise in inflation making shopping more expensive is the leading cause of financial stress among those who report feeling stressed (37%), followed directly by living paycheck to paycheck (35%) and decreased income this year compared to last (34%).
What’s more, supply chain shortages and shipping delays have prompted many to consider shopping early this year — and it’s likely going to cost Americans. Yet, roughly three-quarters of respondents say they’ve saved shopping for October or later this year.
Could the holidays spell debt for consumers this year?
Despite plans to spend less, nearly a quarter of respondents say they expect they will go into debt this holiday season (23%). Of those who plan to take on debt this holiday season nearly half (47%) plan to take on between $301 and $1,000 in debt. In most cases, respondents said they were most likely to go into debt to purchase gifts for family, kids or significant others.
Worth noting, the number of consumers who plan to take on debt this holiday season increases when you compare those who are financially stable to those who are not. In that case, 36% of respondents who report feeling financially unstable right now expect to go into debt this holiday season, compared to just 16% of their financially stable counterparts.
“We’ve seen a tale of two cities throughout the pandemic, and we’re seeing a continuation of this trend as we approach the holiday season,” said Colleen McCreary, consumer financial advocate at Credit Karma. “There are those who remained employed and have been able to save money and pay down debt during the pandemic and others who have struggled to maintain employment and stay on top of their bills, widening the gap between those who are financially stable and prepared for the holidays and those who are not. Plus, with supply chain shortages and shipping delays increasing prices for all shoppers this season, it will be important for consumers to be thoughtful about their spending to ensure they don’t start the new year in the red.”
On behalf of Credit Karma, Qualtrics conducted a nationally representative online survey in October 2021 of 1,020 Americans, aged 18 and above, to gauge how financially prepared consumers are for the upcoming holiday season and the factors impacting their financial preparedness and financial stress.