The Price of Christmas Cheer

For many households, holiday spending represents a significant portion of annual discretionary expenses, sometimes approaching what people spend in a typical month or more, depending on their income and financial situation. According to a recent survey by NerdWallet, U.S. adults are predicted to spend a collective $242 billion on holiday gifts in 2025. Breaking that down, on average, holiday shoppers plan to spend $1,107 per person on presents this season - about $182 more per person than last year. The National Retail Federation (NRF) estimates that Americans will spend about $890.49 per person in 2025 on holiday gifts, food, decorations, and other seasonal items. This per-person average is one of the highest in NRF's survey history. (These figures do not include travel costs, estimated to reach nearly $311 billion on flights and hotels for Americans this holiday season.)

New polling from Data for Progress shows that this year, more than 40% of families are planning to buy fewer gifts, nearly one-third are giving presents to fewer people, and more than one in ten are tapping into their savings. That being said, not everyone spends the same. According to recent data, 41% of Americans expected to spend between $100 and $500 on gifts, and 21% planned to spend between $500 and $1,000 on gifts. This variation reflects different income levels, family sizes, and holiday-giving traditions.

One contributing factor to rising holiday costs is the impact of import tariffs. With imports making up nearly 90 percent of clothing, more than 80 percent of toys, and about 70 percent of electronics, President Trump's 2025 tariffs are estimated to add as much as $28 billion to holiday shopping bills - roughly $130 extra per shopper -  according to The Century Foundation's recent report. As a result, some consumers are reconsidering their holiday spending habits by scaling back on gifts, decorations, or other seasonal expenditures. This suggests that for many, Christmas spending is undergoing a subtle shift from lavish generosity toward more measured, budget-conscious approaches.

The University of Michigan Consumer Sentiment survey tells a divided story this holiday season. Sentiment has fallen sharply among households making under $75,000, even as it has improved for those earning above $200,000. Higher prices are forcing lower-income households to rely more on credit cards or "buy now, pay later" (BNPL) services this holiday season, with Klarna reporting a 45% year-over-year increase from November 1 through Black Friday. Adobe forecasts that Americans will spend over $20 billion this November and December through BNPL services, while higher-income consumers (buoyed by a climbing stock market and inflated home prices) will ring in the season with unprecedented spending power.

Holiday rituals have also been affected by recent inflation. The "Santa Budget" (the cost of milk and cookies) is estimated to cost about $8.44 per household this year, which is an increase of 31% over the past 5 years. Higher costs for baking ingredients such as butter, sugar, eggs, and chocolate are the main drivers of this increase.

This year's holiday reflects how inflation, consumer confidence, and household budgets are intersecting with tradition. Yet despite higher costs and tighter margins, Americans continue to prioritize generosity and connection. Economic and financial awareness should be part of your holiday planning. This includes using gift budgets, shopping early, considering less expensive or second-hand gifts, or even doing non-material gifts such as time or experiences, especially if you are balancing debt or trying to avoid overspending.