Millennials Lead Holiday Spending Despite Debt Concerns

This holiday season, millennials are stepping up as the most optimistic and active spenders among all generations. According to a recent TransUnion report, 63% of millennials plan to match or increase their holiday shopping expenditures compared to last year. This group, many of whom are now parents, is poised to play a dominant role in the expected record-breaking holiday spending.

Millennial Optimism Drives Spending

Charlie Wise, TransUnion’s senior vice president of global research and consulting, highlighted the financial confidence of millennials heading into the holidays. Many in this generation have experienced wage growth that outpaces inflation, coupled with a steady employment landscape. “When people have jobs, that confidence translates into spending,” Wise explained.

The National Retail Federation predicts holiday spending between November 1 and December 31 will reach $979.5 billion to $989 billion, marking a new record. Millennials, with their robust financial optimism, are expected to significantly contribute to this surge.

Rising Budgets Amid Growing Debt

Despite optimism, consumer debt is a growing concern. Deloitte’s holiday retail survey revealed that shoppers plan to spend an average of $1,778 this season—an 8% increase from last year—even as U.S. credit card debt has surpassed $1.17 trillion. Moreover, a NerdWallet survey found that 28% of holiday shoppers have yet to pay off debts from last year’s gift purchases.

Shoppers are turning to various payment methods to finance their spending:

• 74% plan to use credit cards.
• 28% will dip into savings.
• 16% intend to utilize buy now, pay later (BNPL) services.

Risks of Buy Now, Pay Later Services

BNPL services are among the fastest-growing financing options, with spending expected to peak on Cyber Monday at nearly $993 million, according to Adobe Analytics. While these services offer short-term flexibility—often with 0% interest—experts caution that they may lead to long-term financial strain.

Marshall Lux, a senior fellow at Harvard Kennedy School, noted, “If used properly, it’s great. But spreading purchases over a longer period can lead to high interest rates and cycles of debt.”

The risks of BNPL include:

• Overspending due to ease of installment payments.
• Missed or late payments that incur high penalties.
• Interest rates that can rival credit card charges, reaching as high as 30%.

Financial Caution During the Holidays

While millennials and other consumers are eager to celebrate, experts advise mindful spending. Proper management of BNPL accounts and credit cards can help avoid debt traps, ensuring financial health beyond the holiday season.