Most Gen Z and younger millennials are leaning on credit cards to do their holiday shopping this year, according to new survey from Chartered Professional Accountants Canada (CPA Canada).
This year, 40 per cent of Canadians aged 18-34 are planning on spending more on holiday shopping than they did last year and 58 per cent said they plan to dip into their credit cards for what they do plan to spend.
More than half (56 per cent) also say they’re feeling more stressed about holiday spending than they did last year.
“This suggests that many younger Canadians are feeling the pressure to spend, even if that means stretching their budgets a little too far,” says Li Zhang, CPA Canada’s financial literacy leader.
Baby Boomers, however, appear to be more cautious about holiday spending.
Around two-thirds (68 per cent) of Canadians aged 55 or older said they plan to maintain what they spent last year and 70 per cent said they’ll rely on savings and regular income rather than credit to cover their holiday costs.
The top expense most Canadians anticipate this holiday season is presents, with 66 per cent listing it as the top priority going into the holidays.
The survey estimated that the average size of the holiday gift budget is $661 this year.
For younger Canadians, part of the stress of holiday shopping is because they don’t have a lot of wiggle room to plan ahead, said Faye Lucas, head of consumer trust at Canadian FinTech firm KOHO.
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“Our research shows that Gen Z’s average monthly income sits around $1,083, so there’s not a lot of room for flexibility. Many Gen Z Canadians are working part-time, relying on gig or seasonal income, or experiencing uneven work hours,” Lucas said.
“That makes it difficult to plan ahead or build any kind of cushion. When your income can shift month to month, even small seasonal expenses feel bigger,” she added.
All these financial pressures can make using credit cards seem tempting, said Stacy Yanchuk Oleksy, CEO of the non-profit debt relief organization Money Mentors.
“Many of us adopt the attitude that we’ll have a great holiday season and get on track come the new year. Some of the pitfalls of using credit to handle the holidays can include the extra costs,” she said, referring to the interest charges that come with unpaid credit card bills.
Cindy Marques, a certified financial planner, recommends using something called a ‘sinking fund.’
“A sinking fund is simply a savings fund that you are slowly contributing to over a period of time in preparation for a future expense. When the time comes, you have the funds available to you and can spend it guilt-free without taking on debt to do so,” she said.
While it may seem excessive to some, Oleksy says it might not be a bad idea to start saving for the next holiday season starting January if it’s a priority for you.
“As the saying goes, the best time to plant a tree was 20 years ago, the next best time is now,” she said.
How to tackle credit card debt
For those who do plan to rely on credit cards or who have already accumulated credit card debt, experts said there are some tips and advice that can help.
“The first thing to do is not panic — just breathe and remember that every financial problem has a solution. After the holidays are over, take a breath, pour a nice hot cup of coffee or tea, and look at your real numbers,” Oleksy said.
The first thing to do, experts say, is to come up with a repayment plan. Figure out how much you can spare each month to pay down your credit card and set up automatic payments, Marques said.
“This ensures that your debt plan is adhered to and afforded by the available funds paid to you the moment they land in your account. It removes the temptation to negotiate against yourself, and turns your debt payments into what feels an automatic monthly bill,” she said.
If you’re dealing with a large balance and a high interest rate, Marques said it might be worth checking with your bank if they have low-interest card options available.
“Most institutions do,” she said.
“You can then call your institution and ask them to switch your current card to the low-interest card and voila — just like that, you’ve reduced your monthly interest charges with a simple phone call.”
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