Families struggle to balance books as savings rise - but so do debts

Article date: 20 May 2011

  • Significant rise in family savings since January 2011
  • Unsecured debt amongst families with children increases sharply
  • Debt repayments now take up 10% of families’ monthly income (8% - January 2011)
  • Families worried about meeting basic living costs over next six months.

Families are struggling to save while keeping ahead of inflation and on top of unsecured debt, according to research from the latest Aviva Family Finances Report. This in-depth research which is designed to understand the financial needs of customers who live as part of a family* - 84% of the UK population - also shows families have major financial concerns over the next six months.

Savings habits improve:

The typical family now has £1,163 in savings and investments (excluding pensions and property) compared to £849 in January 2011. In terms of how much they are saving, the amount has increased from £22 to £32 per month. The report also shows the number of families with no savings put aside has fallen from 33% (Jan 2011) to 28% (May 2011) and those families saving nothing on a monthly basis has dropped from 40% (Jan 2011) to 37% (May 2011).

Unsecured debt increases:

However, while the typical family has sought to pad out its savings cushion, the average credit card/loan/overdraft debt has actually increased from £5,360 (Jan 2011) to £5,878 (May 2011). One of the main drivers behind this trend appears to be families with children. Indeed, families with two or more children saw their average unsecured debt increase from £5,248 (Jan 2011) to £6,200 (May 2011) and families with one child saw theirs increase from £4,404 (Jan 2011) to £5,452 (May 2011).

The cost of servicing debt as a percentage of household income has also grown from 8% (Jan 2011) to 10% (May 2011).  This may indicate a desire to pay off unsecured debt but the figures seem to indicate that it may simply be servicing increasingly expensive borrowing.

Families worry about meeting basic costs:

With expenditure on almost all of the basic family costs increasing**, most families have significant worries about what the next six months will hold. Almost two thirds (60% from 54% - January 2011) are worried about a significant increase in the cost of basic necessities and 39% (37% - January 2011) are worried about unexpected expenses and 20% (17% - January 2011) are concerned about rising mortgage rates.

While families have seen monthly incomes increase by 6% from £1,937 (January 2011) to £2,062 (May 2011), job security is still an issue. Marginally more people are worried about losing their job (48%) than they were in January (45%) as they struggle to keep up with the rising cost of living.

Paul Goodwin, head of pensions marketing, Aviva, said: “While it is great news that families are saving more, the fact that many have higher unsecured debts and have seen an almost blanket increase in day-to-day living costs is deeply concerning. UK families are worried about the future with almost two-thirds anxious about any increases in the cost of basic necessities over the next six months.

“This research really serves to highlight the precarious balancing act that many face today as they look to meet their financial obligations and provide their families with some type of financial security. At Aviva, we understand these fears and are actively working to ensure that we offer financial products which help families to make the most of the disposable income they do have.”

To see a full copy of the Aviva Family Finances Report see: www.headlinemoney.co.uk.

 –ends                                                                            

If you are a journalist and would like further information on a specific family group, please contact:

Aviva press office:
Sarah Poulter: 01904 452828 / 07800 691569: sarah.poulter@aviva.co.uk

The Wriglesworth Consultancy:
Lee Blackwell / Emma Beresford: 020 7427 1400 / l.blackwell@wriglesworth.com

* This accounts for 84% of the UK population. Based on customer profiles and Government data Aviva has recognised the six most common types of modern family as:

  • Living in a committed relationship with no plans to have children
  • Living in a committed relationship with plans to have children
  • Living in a committed relationship with one child
  • Living in a committed relationship with two or more children
  • Divorced/separated/widowed with one or more children
  • Single parent raising one or more children alone.

** Average amount spent as a percentage of monthly income:

Types of expenditure

Jan 2011

May 2011

Housing (mortgage or rent)

20%

22%

Food

10%

11%

Debt repayment

8%

10%

Nursery care / out of school care

9%

10%

Fuel and Light (eg gas and electricity bills)

6%

6%

Motoring

5%

6%

Entertainment, recreation and holidays (Leisure Services)

4%

5%

Public transport fares and other travel costs

4%

4%

Methodology: 

Management information was provided by Aviva and the remaining data was sourced from the Aviva Family Index which used findings from over 4,000 people who are members of one of the seven groups of families identified above. This report is a definitive look at the personal finances of families in the UK. Not only does it look at personal wealth, income sources and expenditure patterns but also tracks how these change across the different types of family unit.

In addition to the regular data, each quarter a spotlight will be shone onto a different relevant topic with auto-enrolment being the choice for May 2011. 

Notes to editors:

Aviva is one of the world's largest insurance groups* with 53 million customers worldwide and 46,000 employees.

Aviva’s main activities are long-term savings, fund management and general insurance, with worldwide total sales of £45.1 billion and funds under management of £379 billion*.

In the UK, Aviva takes care of its 19.2 million customers by helping them look after their future, protecting what’s important – from their health to their homes, their cars to their business – and saving for the future. 

Aviva has a 10.5%** share of the UK life and pensions market and insures one in six homes and one in 10 cars in the UK. It is also one of the oldest UK insurers, with a heritage stretching back more than 300 years.

RAC, which is owned by Aviva, provides breakdown and insurance services for individuals and businesses and has around seven million customers.

Aviva is carbon neutral worldwide, and is ranked in the top 10% of socially responsible companies globally by the Dow Jones Sustainability World Index. In the UK, Aviva invested £3.8 million into local communities in 2009. Read our corporate responsibility report at www.aviva.com/cr.

Aviva’s global Street to School programme is working in partnership with Railway Children in the UK to get children living on the streets back into education and everyday life. Find out more at www.aviva.co.uk/street-to-school.

The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.

For broadcast-standard video, please visit www.aviva.com/media/video/.

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* based on gross worldwide premiums at 31 December 2009
** Source: ABI data released August 2010 

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