This generation will outspend others over the holidays

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Higher prices aren’t putting a chill on holiday spending this year for younger Canadians, who are gearing up for much bigger budgets than their older counterparts.

In fact, Generation Z anticipated they will spend $2,296 this year — 55 per cent more compared with last year — according to a recent survey from PwC Canada. Millennials are not far behind at $2,233, 51 per cent more than they spent last year.

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“It’s the first time we’re seeing Gen Z with really different behavioural trends,” said Elisa Swern, national retail and consumer leader at PwC Canada.

Swern noted that, while projected spending across all generations swelled 13 per cent compared with last year, part of this increase can be attributed to inflation. The consumer price index for September reported a 1.6 per cent uptick in prices compared with last year.

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Both millennials and Gen Z said they would ramp up spending on travel, entertainment and gifts, although millennials were more likely to spend money on toys for others than any other generation.

The survey findings reflect the stages that younger Canadians are at in their lives, experts said.

Millennials, for example, are more likely to be spending on gifts for their growing families, while Gen Z is entering the workforce and making the most out of their increased disposable income.

Although millennials might have greater cause to spend over the holidays, Alison Simpson, chief executive of the Canadian Marketing Association (CMA), explained that Gen Z likely have the cash to spare, since they have fewer financial responsibilities, such as a mortgage or childcare.

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Swern noted that many Gen Z adults still live with their parents, keeping more money in their pockets.

“I think they really are willing to spend on experiences and meaningful purchases that align with their values,” she said.

Statistics Canada data showing the distribution of household economic accounts for the second quarter of this year, indicated that older members of Gen Z and younger millennials could be faring better in some ways than older millennials.

For example, while Canadians aged 35 to 44 saw their households’ net worth decline by 0.35 per cent year-over-year (the biggest hit taken by any age group since older households saw an increase in wealth), the net worth of households for those younger than 35 slipped by a paltry 0.05 per cent.

There are other reasons why Gen Z could be spending more this year, as well. “They (may) pay more for higher quality products if they think they’re going to last longer,” noted Swern.

And they’re more likely to opt for physical gifts over gift cards, while millennials, Gen X and baby boomers rank gift cards as their top or second-most-common gift to buy.

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Another holiday spending report from Deloitte indicated younger Canadians may be more interested in buying through social media channels, such as Instagram and TikTok. Social media and peer pressure could also be influencing this generation when it comes to splurging, said Simpson, pointing to a “keeping up with the Joneses” mentality.

There is a distinction in the way they spend, as well, with Gen Z more comfortable with flexible payment options, specifically buy-now-pay-later (BNPL) solutions (11 per cent, compared with five per cent across all generations). The accessibility and ease of BNPL could encourage them to spend more now, even if it means stretching their budgets.

On the opposite end of the spectrum, Simpson said older generations may have more concerns about economic uncertainty, causing them to pull back on spending this year. Members of Gen X expect to spend 11 per cent less ($1,766) and baby boomers think they will spend nine per cent less ($1,412) over the holidays, compared with the same time last year.

“There’s an increased focus on spending for retirement and other longer-term goals, which could lead to a more cautious spending approach,” said Simpson. “I think they’re less influenced by social media trends and peer pressure.”

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She also believes they might have fewer gift recipients as their children age and become adults themselves.

The acceleration in spending among Gen Z this year is not necessarily going to be sustained in the coming years, Simpson noted. As Gen Z gets older, the nature of their holiday spending may change, such as focusing on gifts for their children or cutting back on spending to increase their savings.

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