’Tis the season for tighter budgets.

This year, holiday spending in the U.S. is anticipated to decrease by 5%, mainly influenced by Gen Z’s significant 23% reduction, as reported by a prominent consulting and accounting firm’s survey.

According to PwC’s 2025 Holiday Outlook, households intend to be more thoughtful about their holiday expenses, focusing on value and strategically deciding where to indulge and where to cut back, as the report highlighted on Wednesday.

The anticipated spending decline emphasizes the impact of economic uncertainty on consumer confidence as the most critical retail season approaches.

This year marks a stark contrast for Gen Z compared to 2024, when their estimated holiday budgets increased by 37%. (Actual holiday spending rose by a moderate 6%, according to PwC’s analysis of card transaction data.) The recent survey from PwC revealed that 25% of Gen Z feel their financial situation has worsened since last year, as opposed to 17% in 2024.

Factors like inflation, job security concerns, and new financial obligations are causing Gen Z to curb their expenses, explained Ali Furman, PwC’s consumer markets industry leader. Many young adults are going through major life transitions in a challenging job market for recent grads, frequently without substantial savings. “It’s a coming of age story for this generation,” with some purchasing homes and starting families for the first time, prompting them to budget more wisely, Furman noted.

The survey indicated that Millennials and Gen Xers plan to maintain their holiday spending at similar levels to last year. Meanwhile, Baby Boomers are the only group expecting an increase, with average spending projected to rise by 5%.

Anzhelika Parenchuk, a 23-year-old first-year doctoral student at George Washington University, said she’s approaching the holidays with a tighter budget and turning more to discount retailers like Dollar Tree and Five Below for gifts.

“They have the same things as other retail stores, but cheaper,” she said.

Parenchuk said she learned her lesson after overspending last year. Now, without income from her former job since starting graduate school, she said she is stricter with her budget. Inflation has forced her to buy fewer things, and news about tariffs has her worried prices could climb even higher, she said.

Gen Z’s tighter holiday budgets are also driven by spending habits that prioritize splurging on experiences while seeking affordability elsewhere, curbing their appetite for lavish holiday shopping, PwC’s Furman said.

Gen Z is reluctant to cut back on concerts and events, even as ticket prices surge. A recent survey from the marketing agency Merge found that 86% of young adults admit to overspending on events. “Those experiences are taking up a lot more of their wallet share,” Furman said, “so they have less money to spend on holiday than they have in the past.”

Teens and young adults, shaped by an era of constant price increases, are drawn to value and embrace “dupe” culture, seeking cheaper alternatives to brand names, which allow them to stretch their budgets. Even for high-status items, Gen Z prefers them at a reasonable price, a concept that Furman called “affordable exclusivity.” She pointed to Labubus as a prime example of this phenomenon.

These value-oriented spending patterns reflect a larger trend across the economy. Retailers catering to budget-conscious consumers have been among the winners this past earnings season, with Dollar General, Five Below, TJ Maxx and Walmart reporting better than expected sales. On the other hand, companies that target middle- to higher-income shoppers, such as Target, have struggled.

A recent survey conducted by the digital coupon company RetailMeNot also found that shoppers plan to spend less this holiday season, with average budgets down 15%. Rising prices topped respondents’ concerns, and many said they would switch to different brands or start shopping earlier if tariffs drive costs higher. Shoppers are “spending with purpose, planning ahead, and saying yes to the right deals, just not all the deals,” said Stephanie Carls, retail insights expert at RetailMeNot.

The pressure on consumers could become even stronger in the coming months, which is probably bad news for someone like Parenchuk, who said rising prices have weighed on her shopping experience.

“It’s depressing,” she said, noting that what used to cost $10 now feels closer to $20, and she’s had to buy fewer items. She said she is trying to manage stress by setting stricter budgets.

“Get cash, and once you’re out, you’re out,” Parenchuk said, “just be more strict with myself for my own good.”