The average cost of Christmas: Gifts, food, decorations and more

The holidays are quickly approaching, and your shopping may already be in full swing as you search for the perfect presents and festive decorations to celebrate Christmas, Hanukkah or Kwanzaa. Shoppers expect to spend an average of $998 on gifts and other holiday expenses during the 2021 holiday season, according to the National Retail Federation (NRF) Holiday and Seasonal Trends survey.

Overall holiday spending in the U.S. has increased steadily each year and 2020 was no exception, despite the COVID-19 pandemic. Americans spent $789 billion during last year’s holiday season, according to an NRF report, exceeding forecasts and reflecting an 8.3 percent increase over 2019. It also marked the 13th consecutive year of growth in holiday sales.

Key Christmas cost statistics

This year’s holiday spending may be on par with that of 2020, the NRF reports. The average planned expense per person in 2021 of $998 consists of:

• $648 in gifts for family, friends and co-workers.
• $231 for items such as food, decorations and cards.
• $118 for other nongift purchases.

The price of each gift you intend to buy may very well be higher this year due to renewed inflation. Prices of consumer products have been rising over the past five months at the fastest rate in 13 years, and inflation is up 5 percent over last year without a clear end in sight.

Average cost of Christmas

The 8.3 percent increase in retail sales during the 2020 holiday season, which comprises sales during November and December, reflects more than twice the average increase seen over the same timeframe in the previous five years. A factor that may have contributed to the uptick in sales is people’s reluctance to travel during the pandemic, which freed up money in budgets for other spending.

A total of $209 billion in spending was attributed to online sales in 2020, up nearly 24 percent over the year 2019. Many consumers preferred to stay out of stores, with online transactions accounting for slightly more than one quarter of all sales. Online sales were boosted by retailers offering in-store pickup services, allowing people to buy things online even after shipping cutoff dates had passed.

Here’s how Americans plan to spend for the holidays in 2021, broken down by gifts, nongift items and holiday-related experiences:

Average cost of gifts

Clothing and accessories are forecast to make up the largest amount (22 percent) of consumers’ gift spending this shopping season, according to Deloitte’s 2021 holiday retail survey. Gift cards, cash, data plans and subscription products comprise the second-largest category, followed by food and beverage purchases and electronics at 14 percent each.

Source: 2021 Deloitte holiday retail survey

Gift cards are one of the most common holiday presents given by Americans. Popular gift cards include those for restaurants, food delivery services, streaming services, grocery stores, big box stores and strictly online retailers. Co-branded gift cards also remain popular thanks to their versatility.

This holiday season may see a significant uptick in gift card purchases since gift cards can be easier to find than specific clothing, toys and electronics. Such items can be difficult to come by due to supply chain bottlenecks, resulting from pandemic-related factory closures, and widespread shortages of truck drivers and factory workers.

A 27% increase in gift card purchases is predicted this holiday season, according to a Blackhawk Network 2021 holiday forecast survey, which found:

• Average number of gift cards shoppers plan to purchase: 15.
• Average planned spend on gift cards: $272.
• Percent of shoppers who plan to give a gift card instead of a physical gift: 83%.

Average holiday spending by state

Maryland, which has the highest median household income in the U.S. at just over $80,000 per year, leads states with the highest spending potential, according to a U.S. Chamber of Commerce report, which takes into account household income and expenses, debt, savings and cost of living. The five states with the highest discretionary holiday income are:

• Maryland: $2,715.
• Utah: $2,310.
• Hawaii: $2,152.
• Virginia: $2,103.
• New Jersey: $2,051.

On the other end of the spectrum, West Virginia tops the list of states with the lowest holiday spending potential. West Virginia has a high poverty rate and the lowest median household income in the country — less than $45,000 a year. The five states with the lowest discretionary holiday income are:

• West Virginia: $355.
• Florida: $420.
• Maine: $424.
• Louisiana: $538.
• Montana: $543.

Average cost of holiday spending by demographics

In addition to where they live, how much consumers plan to spend this holiday season may vary by age and gender. Men expect to spend an average $1,046 this year on the holidays, while women plan to spend an average of $952, according to NRF data.

Consumers age 45-54, most of whom fall into the Generation X category, plan to spend the most this holiday season, followed by those age 35-44, most of whom are millennials.

Source: National Retail Federation Holiday and Seasonal Trends survey

How consumers are shopping

Consumers are somewhat more willing to shop in physical stores this year than in 2020, according to the Deloitte holiday retail survey. Shopping behavior continues to be affected by the COVID-19 pandemic, however, as 40 percent of consumers feel anxious about shopping in stores, down from 51 percent in 2020.

Shoppers plan to make 62 percent of their holiday purchases online, motivated by factors like safety concerns and convenience, according to Bankrate’s sister site CreditCards.com. Retailers commonly offer free standard shipping, or else consumers often choose to avoid shipping costs by shopping online and picking up orders in the store or at curbside.

Other reasons people may prefer to shop online include a wider selection of products and the opportunity to score better deals.

Facebook, Twitter and Instagram are sure to influence holiday buying behavior, especially in groups like millennials and Generation Z, who commonly report social media impacts their purchase decisions.

Holiday spending budgeting tips

Getting the most out of your holiday spending budget requires some creativity, planning and research. Shopping as early as possible can help mitigate shipping delays and increase the chances items will be in stock. Here are some additional shopping tips that may save you some time and money this holiday season:

• Make a list and check it twice. Gather the names of everyone you plan to buy gifts for, along with ideas of one or more gifts they would like.
• Create a holiday spending budget. Using a spreadsheet or a simple piece of paper, determine how much money you have to spend and allocate a dollar amount for each gift recipient, along with categories like decorations, greeting cards and food.
• Give handmade gifts, when appropriate. If you’re a scrapbooker, photographer or baker, put those skills to work by gifting items like photo albums or homemade sweet treats. (You can hardly go wrong with giving food items as gifts, as long as you’re mindful of any food allergies the receiver may have.)
• Go with a Secret Santa or grab bag gift exchange. These ideas are a good option for large families or anyone for whom holiday spending can get out of hand. Each person draws a name in advance and buys a gift for that person only. Decide upon a spending habit with which everyone is comfortable.
• Start planning for next year. Start setting aside money now in a high-yield savings account or a dedicated Christmas Club account for next year’s holiday expenses. Getting a head start will reduce stress next year and help avoid credit card debt. Also, keep track of gift ideas when they come to you throughout the year, to eliminate last-minute angst about what to get someone.