- Three fourths (74 percent) of Americans say inflation and rising costs of living will cause them to buy fewer holiday gifts.
- Despite spending less on gifts, two in three Americans (63 percent) plan to give back to charitable causes.
- 55 percent say they will incur debt to cover holiday shopping – up from 52 percent in 2022.
CHICAGO, Nov. 8, 2023 /CNW/ - As holiday shopping begins, the latest BMO Real Financial Progress Index found that inflation and rising costs of living are causing 74 percent of Americans to cut down on the number of gifts they buy this year. In fact, 82 percent of Americans say their overall financial situation is causing anxiety, with only 6 percent planning to increase what they typically spend and buy more gifts.
Specifically, Americans say inflation and rising costs of living are causing them to adjust holiday shopping plans this year. Top changes Americans say they will make are:
- Buy less expensive gifts (38 percent).
- Reduce spending and make fewer big purchases (34 percent).
- Cut down on holiday gift lists (26 percent).
- Spread out purchases over several weeks or months (28 percent).
Adding to the stress of the holidays, more than half of Americans (55 percent) say they plan to take on debt to cover holiday gifts – up from 52 percent this time last year – with nearly half using a credit card (46 percent), followed by other means such as buy-now-pay-later programs (9 percent) or a line of credit (3 percent). On average, Americans say it will take them as long as three months to pay off their holiday gifts, with fewer than half feeling like they can free themselves from their holiday debts within a calendar month (46 percent).
"The holidays are still several weeks away, which means now is the perfect time for Americans to build a holiday spending budget to get a clear picture of how much they can afford to allocate toward gifts, travel and holiday gatherings," said Paul Dilda, Head of U.S. Consumer Strategy at BMO. "Given that so many Americans plan to put their holiday gifts on credit cards, a holiday budget and taking advantage of planning tools in digital banking apps will not only help prepare them to stay on track toward long-term real financial progress, but also alleviate the financial anxiety the majority of Americans say they have associated with holiday spending."
Despite spending less due to inflation, Americans still in a spending mood
The research found that about half of Americans often spend more money than they know they should (51 percent), and according to BMO Economics, American shoppers recently ended the third quarter the way they started it: in a spending mood.
"It's important to note, spending does look to downshift from the 4 percent annualized pace of the third quarter, although it should still remain at around half that rate throughout the rest of the fourth quarter of 2023 – which is notable considering the more than 5 percentage points of Fed rate hikes," said Michael Gregory, Deputy Chief Economist at BMO. "We saw a significant pickup in real wages, employment growth and confidence boosted spending this past summer – but the latter looks to fade while households deal with higher interest rates and student loan repayments."
Additionally, following the second consecutive Fed decision not to raise rates on Nov. 1, Gregory added, "That could be evidence that a prolonged pause may be unfolding, but it's still premature to rule out another rate hike in December or January to further tame inflation."
Regardless of economic concerns, Americans' charitable giving plans remain strong
While rising costs of living and inflation are enough to cause most consumers to spend less on holiday gifts, nearly two in three Americans (63 percent) plan to give back.
- How Americans give back: The top three ways Americans plan to give back are by contributing money to a cause (35 percent) and volunteering time (23 percent)
- Why Americans give back: Most Americans say helping people in need motivates them the most (64 percent), followed by supporting causes they care about (54 percent), and to teach their kids about the importance of giving (31 percent).
- Who plans to give the most: Younger Americans ages 18 to 24 are more interested in giving back (73 percent). That's compared to 67 percent of those ages 25-34, 68 percent of those 35-44, 56 percent of those 45-54, 57 percent of those 55-64, and 62 percent of Americans 65 and above.
"The feeling that comes with making a lasting impact is unforgettable: that's what philanthropic giving does, and it doesn't have to be a million dollars to make a real difference," said Brook Kramer, Head of Philanthropy and Impact at BMO Family Office. "For those who have the resources to make purposeful contributions that will support progress in their communities, working with a professional will help Americans be more thoughtful with their donations and volunteer work."
For Americans looking to give back this holiday season, there are a variety of options available:
- Donate directly: Donate cash or other assets to a charity's general fund for unrestricted use, or to a restricted fund for a specific project. Donate appreciated publicly traded stock that you've held for more than one year.
- Donate through your will or trust: Make testamentary gifts to charities in your will or trust by giving a set dollar amount or a portion of your estate or trust.
- Designate a charity as the beneficiary of your Individual Retirement Account (IRA) or 401(k): Charities do not pay income tax on donations they receive from these accounts. However, you may need spousal consent in the case of a 401(k); check your state's laws.
- Establish a donor-advised fund (DAF) or your own private foundation (PF): Both a DAF and PF offer an immediate income tax deduction in the year of the gift and allow you to distribute the funds over an extended period of time.
To learn more about charitable giving, including additional tips, visit https://uswealth.bmo.com/insights/exploring-charitable-giving-and-beyond.
In addition to creating a holiday spending budget and sticking to it, BMO offers the following tips to help Americans make real financial progress and navigate inflation:
- Take advantage of BMO's Real Financial Progress Hub, a digital resource that allows customers to easily access personal finance advice and guidance, as well as tools and resources to reach their own specific financial goals.
- Regularly meet with your banker or financial advisor to make sure your savings and payment patterns are on track to reach both near- and long-term goals.
- Use free digital banking tools and apps to help track spending patterns and save.
- Track your incoming and outgoing money flow as well as expenses that will help build the framework to create an accurate budget.
- Establish and build credit with credit-building solutions such as a credit building loan or secure card – and monitor your credit report score and activity often.
- Set up a savings goal and recurring savings transfers into an account – no matter the amount – which will provide a sense of progress and motivation to achieve your savings goal.
- Make a budget or savings plan specifically for large purchases like a car, vacation, or new appliance.
To find out how BMO helps customers make financial progress, visit: https://www.bmo.com/us.
The research detailed in this document was conducted by Ipsos in the United States from Sept. 11 to Oct. 9, 2023. A sample of n=2,502 adults ages 18+ in the United States was collected. Quotas and weighting were used to ensure the sample's composition reflects that of the U.S. population according to census parameters. This survey has a credibility interval of +/- 2.2 per cent 19 times out of 20, of what the results would have been had all American adults 18+ been surveyed.
BMO Financial Group is the eighth largest bank in North America by assets, with total assets of $1.25 trillion as of July 31, 2023. Serving customers for 200 years and counting, BMO is a diverse team of highly engaged employees providing a broad range of personal and commercial banking, wealth management, global markets and investment banking products and services to over 13 million customers across Canada, the United States, and in select markets globally. Driven by a single purpose, to Boldly Grow the Good in business and life, BMO is committed to driving positive change in the world, and making progress for a thriving economy, sustainable future, and inclusive society.
SOURCE BMO Financial Group